Infomedia
Annual Report 2004

Plain-text annual report

Results and achievements at a glance Continued financial growth Sales revenue increased by 12.5 per cent to $69.6 million. Net profit after tax increased 12.9 per cent over the previous financial year to $20.7 million. Continued subscription growth Subscriptions to our Electronic Catalogues Division products grew by 10.6 per cent to 51,524 units through organic expansion in all markets. Continued strong EBITDA margins Our EBITDA margin (i.e. EBITDA/sales) for the year was 51.3 per cent, even after taking into account setup costs associated with the creation of our European subsidiary in the fourth quarter. Continued record R&D investment Our investment into research and development was $3.6 million, as we continue to improve and expand our portfolio of software products. Continued employment expansion Employee numbers increased by 19.9 per cent to 205 and arose mainly from the creation of the international Customer Service Centre in Sydney, Australia, the European office in Cambridge, England, and production and development personnel in all divisions. Continued product commercialisation The Data Management Division began to commercialise Superservice Menus™ in Australia. The subscription results for the first 10 months of introduction exceeded the first 24 months of the original introduction of Microcat®. Continued good governance The Committees of the Board, (Audit & Risk, Corporate Governance and Remuneration & Nomination) determined the appropriate approaches to adopt in applying the ASX Good Corporate Governance and Best Practice Recommendations to Infomedia’s circumstances. Established IFM Europe Limited From 1 July 2004 our wholly owned subsidiary, IFM Europe Limited, took over the obligations previously performed by our European agent, positioning Infomedia to sell directly and support its industry-leading products. Established new headquarters During the year Infomedia purchased, and relocated to, its new corporate headquarters at Frenchs Forest, NSW. The new facility is expected to serve the growth of the Company for many years and will preserve the substantial capital improvements required for the kind of work the Company performs. Established international Customer Service Centre Infomedia established its new international Customer Service Centre, concurrent with the opening of the new headquarters. The Centre’s team of professional, multilingual staff currently serve European customers during their local business hours. www.infomedia.com.au 1 2 www.infomedia.com.au chairman’s letter Dear Fellow Shareholders, I take pleasure in presenting your company’s Annual Report for the 2004 financial year and commending it to you. Infomedia has achieved its eighth consecutive year of revenue and profit growth. Sales revenue increased by 12.5 per cent over FY2003 to $69.6 million. Net profit after tax increased by 12.9 per cent over the previous financial year to $20.7 million. Earnings per share rose by 12.7 per cent from 5.65¢ per share in FY2003 to 6.37¢ per share in FY2004. A fully franked dividend of 1.9¢ was paid to shareholders of record at 7 September 2004. This, combined with the earlier interim dividend declared on 24 February 2004 of 1.9¢, brings the total franked dividend for the year to 3.8¢ per share. You can review the financial performance in more detail in the Audited Financial Report starting on page 18 of this Report and in the Statement of Financial Performance. It has been an active year on all fronts. The Electronic Catalogues Division’s EPC subscriptions grew by 10.6 per cent from 46,580 subscriptions at the start of the year to 51,524 at 30 June 2004. The Data Management Division began commercialising its new Superservice Menus™ product which has received positive customer reactions. The Business Systems Division revenues grew by 24.5 per cent as the Australian dealer management system market continues to consolidate toward two or three major providers. Throughout the year, the Board has worked diligently to analyse the approach to adopt in applying the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations in a way that is appropriate to Infomedia’s particular circumstances. You’ll be pleased with the professionalism with which the Directors have applied themselves to this task. Details of our practices can be found commencing on page 64, entitled Corporate Governance Statement. There are many good people who make Infomedia the special company that it is and who enable it to produce the results it has for many years. However, like they say in the fine print, ‘previous performance is no assurance of future performance’, as challenges and challengers constantly seek their own advantage. That aside, I can let you know that your Company’s staff, Management and Directors are committed to its long term growth and viability, and will do all that is in their power to achieve those objectives. I hope to see you at the Annual General Meeting in October. Respectfully Yours, Richard David Graham Chairman and CEO www.infomedia.com.au 3 company profile Infomedia Ltd provides specialised IT software solutions and services to automotive associated businesses throughout In early 2000, the Company began to supplement its organic expansion with the acquisition of another Australian EPC maker, the world and appliance whitegoods businesses in the Datateck Publishing Pty Ltd, who also brought content development Asia Pacific region. and strong automotive data analysis skills with them. Later that The Company was established in Frenchs Forest (Sydney) in 1988 as a distributor of computer products. In 1990, Infomedia established a software development division to create specialised electronic selling and cataloguing solutions, incorporating multimedia and advanced programming technology. “Infomedia is an innovator in automotive selling solutions and is a market leader in EPC reliability, performance and customer service.” Infomedia’s new headquarters in Frenchs Forest In late 1991, it introduced its first product, Microcat®. Since then, year, Infomedia became a public company, listing its shares on the Microcat has been the Company’s flagship product and has gone on Australian Stock Exchange in August. to become a leading electronic parts catalogue (EPC) for the global automotive industry. Further acquisitions followed over the subsequent years, providing greater depth to our EPC core, while positioning the Company to take advantage of further software supply opportunities within “The Company’s flagship product, Microcat, the same customer base. Two of these acquisitions took us into has gone on to become a leading electronic parts the pivotal centre of automotive dealership businesses – dealer catalogue (EPC) for the global automotive industry.” management systems – while another expanded our American EPC market share. In 1994, the Company sold its computer products distribution business to Unisys, to exclusively focus on software development. Currently our EPC products have achieved more than 51,000 subscriptions in 166 countries, and are published in 25 languages. During the balance of the 1990s the Company continued to develop The Company has a solid domestic business providing a range of its methods and expertise in this genre of software, domestically at information technology solutions associated with retail automotive, first and then internationally from 1996. vehicle servicing and appliance whitegoods businesses. 4 www.infomedia.com.au www.infomedia.com.au 5 Subscribing countries More than 51,000 subscribers in 166 countries benefit from Infomedia’s EPC products Infomedia produces versions of its automotive EPC products for most The combined market share of the Company’s AutoLedgers® and leading automotive franchises in Australia, including Daihatsu, Ford, Nova™ dealer management system (DMS) products, makes it a top Holden, Honda, Hyundai, Isuzu, Mitsubishi, Suzuki and Toyota; and domestic provider, a position that grew further last year. its whitegoods EPC products serve Electrolux and Whirlpool traders in Australia and New Zealand. International versions of Microcat are produced for Daihatsu, Ford, Hyundai, General Motors, Land Rover, Lexus, Saturn and Toyota dealers. Around the world, Microcat is synonymous with Our unique range of service data publications are compiled and published by our Data Management Division. The Datateck Lubrication & Tune-up Guide™, Service Information Publications® (SIP®) and the Lubricant Recommendation Guides™ are used throughout Australia by franchised dealers and independent repair high quality, ‘industrial strength’ EPC solutions. Infomedia is an garages alike. innovator in automotive selling solutions and is a market leader in EPC reliability, performance and customer service. The Company has a track record of continuous product improvement and practical research and development. As a result, its EPC products have remained at the forefront of the genre and new product innovations, such as its Superservice Menus™, AutoMotives® (CRM), and Microcat® LIVE™ add to the growth momentum of its portfolio. 4 www.infomedia.com.au www.infomedia.com.au 5 the year in review Richard Graham Chairman and CEO Infomedia Ltd During FY2004, Infomedia continued to mature as a public company and in its business genre. I am pleased that our which took over the activities previously performed by our former European agent. IFM Europe will represent and support the financial achievements were within the guidance provided at international products of all our divisions. This is a very exciting the beginning of the year. The results represent another year prospect – one that we expect will enhance our goodwill with of growth in both revenue and profit and are in line with our current and new customers as only personal representation can do. strategy of developing products that generate a steady recurring revenue stream. Company Director, Andrew Pattinson, took up the role of Managing Director of IFM Europe and relocated with his family to England Each division has contributed to the Company in terms of growing earlier this year. revenues, new product development and management maturity and strength. All of this is certain to reflect well on our future results too. One of the year’s major achievements was the formation of an international Customer Service Centre, located at Frenchs Forest. The Data Management Division is beginning to commercialise This professional and multilingual team currently serve our European its recent development of the Superservice Menus product, the customers during their normal business hours. release of which has been a milestone in the Company’s progress this year. “Each division has contributed to the Company in terms of growing revenues, new product development and management maturity and strength.” Since their North American launch in 1999, our electronic parts catalogue (EPC) products have been growing in acceptance and reputation. I am especially encouraged by our results when one takes into account that we came into a market with several established and strong competitors. Despite this competition, we have played a good game and have The Business Systems Division’s AutoLedgers and Nova dealer won acceptance, by both dealers and automakers alike, as good management system (DMS) products continued to be accepted by competitors who bring fresh life and quality to retail automotive more and more domestic dealers, winning ground and a positive IT. Our North American subscriptions grew by 15 per cent during reputation against incumbent suppliers. the financial year. We are confident that our North American EPC business will continue to grow and our Superservice Menus products We established our first overseas subsidiary, IFM Europe Limited, will find similar acceptance. Cambridge, England – home to IFM Europe Limited 6 www.infomedia.com.au www.infomedia.com.au 7 Management continues to value the good and cordial relationships with our Asian automaker licensors. Without a doubt, the trust and goodwill that has developed between Asia’s leading automakers and Infomedia during the past decade will continue to grow into mutually beneficial endeavours. Our staff skills include fluency in Chinese, Japanese and Korean and each year our understanding and respect for the cultural distinctions of Asia grow greater. In December 2003, the Company purchased new corporate headquarters at Frenchs Forest, New South Wales, and relocated to the property following fit-out in April. Our new headquarters remove a number of environmental and occupational risks inherent in our previous Narrabeen location, where the Company had resided since 1995. The international Customer Service Centre communicates with customers and prospects across Europe There is still immense potential yet to be tapped for specialist customers in serving themselves, using our online EPC. This is a automotive and appliance industry software solutions. A large share breakthrough that represents immense potential to dealership of the EPC market is still held by the car manufacturers, many of subscribers to better serve their customers at a lower cost per whom use cataloguing and service systems developed in-house, and transaction and to do so ‘24/7’. As Microcat MARKET grows in whitegoods cataloguing is often still based on paper or microfiche. acceptance, its licensing model is expected to make a meaningful So the Company continues to seek contracts with manufacturers contribution to the Company’s revenues from FY2006 onward. around the world for new catalogue data licenses. “There is still immense potential yet to be tapped for specialist automotive and As we say in Australia, Infomedia has become a ‘tall poppy’ in its field. From humble beginnings just 15 years ago, Microcat has become a leading global EPC product. appliance industry software solutions.” With this distinction come challenges as well as accolades. In Such in-house EPC systems generally do not exhibit the level of flexibility of Infomedia’s products, nor do any of them provide a multi-franchise solution so vital to dealership cost and productivity performance. I believe the Company has considerable opportunity to continue growing its market share in all regions. In FY2004, some automakers began to accept that our products can play a valuable role beyond their dealers and can bring self-service parts interpretation to the dealers’ customers. In Europe, Ford and Toyota became the first data providers to allow us to initially release Microcat FRESH® to our customers’ customers on a limited basis. particular, because of our transparency and well-run business, we have begun to attract the attention of various challengers. However, if we have done our job right, which I believe we have, we’ve built a sound commercial and technological foundation; we’ve invested in future product development; and we’ve nurtured a business culture that is committed to creating a company ‘built to last’. We cannot avoid the challengers and challenges, but we can face them, we can address them and we can surpass them. Microcat® MARKET™ (previously branded Microcat FRESH) initiates Richard David Graham a new era in parts commerce, where dealers will assist their trade Chairman and CEO 6 www.infomedia.com.au www.infomedia.com.au 7 financial review Peter Adams Chief Financial Officer Infomedia Ltd The 2004 financial year represents another year of positive financial growth for the Company. At the beginning of the year we announced an expected growth of sales revenue and profits of between 10 and 15 per cent over the previous corresponding year. I am pleased to confirm the actual sales revenue and profit increase achieved is near the midpoint of that guidance, at 12.5 per cent and 12.9 per cent respectively. Subscriptions for our Electronic Catalogues Division products grew by 10.6 per cent to 51,524 units, driven by new sales in the North American market and the continuing rollout of Microcat to Toyota’s European dealers. Subscription growth is one of the primary means by which we measure our business as each subscription represents a recurring unit of revenue. Infomedia and Toyota staff visiting a Microcat FRESH pilot customer in Sweden The Company’s revenue has exposure to foreign currencies – principally the US dollar and the Euro. We have historically entered into foreign currency forward exchange contracts to manage our exposure to currency fluctuations. “Subscriptions for our ECD products grew by 10.6 per cent to 51,524 units, driven by new sales in the North American market and the continuing rollout of Microcat to Toyota’s European dealers.” Infomedia has benefited over the last couple of financial years Employee numbers have increased by 19.9 per cent over the year to from a favourable currency hedge rate relative to the spot market. 205, with most of the increase arising in the fourth quarter from the For the US dollar, our average hedge rate for FY2004 was below creation of an international Customer Service Centre that operates US57.5 cents (FY2003: US55 cents). We have taken out hedging for from our new headquarters in Sydney, Australia, and our new FY2005 at rates averaging US66.4 cents to the Australian dollar for a European subsidiary in Cambridge, England. We anticipate that this substantial portion of our US dollar revenue stream. will add future synergies and reduce future costs overall. Our EBITDA margin (i.e. EBITDA/sales) for the year was 51.3 per I believe the most significant event for the Data Management cent even after taking into account setup costs associated with the Division during FY2004 was the successful launch of Superservice creation of our own European subsidiary in the fourth quarter. Our Menus in Australia. From a financial perspective, Superservice EBITDA margins have now averaged around 50 per cent for the Menus has a recurring revenue model similar to Microcat, where last three financial years and demonstrate the Company’s ability to dealers subscribe to the product on a monthly basis. control costs over an increasing revenue base. Cost control, however, has not been at the expense of the future. with a string of new dealerships signing up for the AutoLedgers Our annual investment into research and development was at a and Nova DMS products. The competition for dealer management record $3.6 million, as we continue to improve and expand our systems is very strong and to win this new business is a credit to Our Business Systems Division emerged during the FY2004 year portfolio of software products in all divisions. the quality of our products and the people behind them. Much of the incremental recurring revenue from these new licenses will be recognised during FY2005. 8 www.infomedia.com.au www.infomedia.com.au 9 With a recurring revenue model, Superservice Menus has the potential to become as successful as Microcat Our European financial business model faces some additional • we will have greater accounts receivable administration and challenges going into FY2005. Historically, the Company’s collection exposure. accounting processes have leveraged off third parties and, in some cases, the automakers who have performed a centralised billing and Helping to moderate these challenges will be: collection function. • the continued organic growth from our EPC business; “Our EBITDA margins have now averaged around 50 per cent for the last three financial years and demonstrate the Company’s ability to control costs over an increasing revenue base.” While these processes remain as they were for most of our European business, from 1 July 2004 Infomedia took direct responsibility for billing our Ford subscribers across Europe, in many different languages and currencies. In FY2005, the Company will face new challenges: • our revenues will be translated higher currency exchange hedge rates; • we will face new competition entering the European EPC marketplace; and • a stronger contribution from our Data Management Division and its Superservice Menus products; and • an improving contribution from our Business Systems Division’s AutoLedgers and Nova products as they build on new business successes and their growing market profile. Peter Adams Chief Financial Officer 8 www.infomedia.com.au www.infomedia.com.au 9 electronic catalogues division Gary Martin General Manager Electronic Catalogues Division The Electronic Catalogues Division (ECD) develops and licenses electronic parts and service catalogues to the international automotive industry. It is presently the largest of readying the European market for its launch during the first half of the new financial year. Toyota and Ford dealers in Europe will be the first dealers to experience the improved performance and potential the three divisions. of Microcat LIVE. The Division’s core product, Microcat, has become a benchmark for Totally reprogrammed using Microsoft’s .net technology, Microcat electronic parts catalogues (EPCs) in its industry. It is an advanced LIVE will deliver the long-awaited ability for dealers to receive EPC that enables automotive dealers to increase efficiency, customer ‘interim updates’; that is to say, changes to the catalogue data that satisfaction and parts sales. may occur between the normal monthly DVD releases. However, Microcat identifies the correct fitting part rapidly by matching dealers can take this concept a step further by running the application ‘live’ and accessing Infomedia’s realtime data servers vehicle identification criteria to the application criteria for parts via the Internet. made by an automaker. The objective of this identification process is to contribute to the vehicle being repaired quickly and accurately Microcat LIVE also introduces numerous new functional features by selling the right part the first time. It is a fast and accurate EPC that that will empower all parts professionals to sell more quickly and also offers effective integration with numerous dealership invoicing more accurately. and inventory control systems. I look back on FY2004 as a year of opportunity and challenge, Microcat LIVE. We anticipate that this will be completed during where the collective effect has been the forging of a stronger and FY2006. Once completed, the transition is expected to deliver more competitively-enabled Electronic Catalogues Division. savings to the Company by reducing costs to maintain, produce and In time, all current versions of Microcat will be converted to support our current technology. EPC subscriptions continued to grow in all regions. There was a total growth of 10.6 per cent or a net increase of 4,944 subscriptions during the year. During much of the year the Division’s operational objectives focused on: readying the new fortified versions of Microcat LIVE and Microcat MARKET for release in the first half of FY2005; planning for transitioning North American General Motors dealers from PartsImager™ to a more feature-rich version of Microcat; dealing with the unexpected changes in European and North American representation; and preparing for the important transition from exclusive to non-exclusive EPC supplier to European Ford dealers. “Microcat LIVE is a dramatic evolution of automotive EPC and will deliver the long-awaited ability for dealers to receive ‘interim updates’.” Microcat LIVE Microcat LIVE is a dramatic evolution of automotive EPC, that is a hybrid of traditional fixed-media (DVD-Rom) and online access. Our developers have been evolving the complex behind-the-scenes programming for LIVE, while our commercial teams have been 10 www.infomedia.com.au www.infomedia.com.au 11 Microcat LIVE on DVD Microcat MARKET Microcat for North American General Motors dealers For a number of years the Company has possessed a version of During FY2004, members of our ECD development and product Microcat suitable for use by dealers’ trade customers that would management teams worked diligently to prepare for the first new identify parts they need and allow them to order those parts EPC offering in a decade for North American General Motors from the dealer 24 hours a day, 7 days a week. We’ve called that Microcat FRESH. Its use was generally restricted by our licensors who wanted to feel more certain that parts e-commerce would be received well by their dealers, especially after the negative impression left in their minds as a result of the aggressive behaviour of ‘parts aggregators’ and ‘parts exchange portals’ during the heyday of the dot-com bubble. “Microcat MARKET will deliver tangible productivity and financial savings to both the dealership and its customers, while extending ‘trading hours’ from 8am–5pm/Monday–Friday, to 24/7.” However, after limited trials in Europe during FY2004, we will commence a broader rollout of this technology in FY2005; initially to European Toyota and Ford dealers and then to dealers in other regions. Rebranded now as Microcat MARKET, this browser-based system will allow a dealer to empower its customers to serve The upgrade for GM customers from PartsImager to Microcat has been a significant achievement themselves, to select parts and place orders directly into the dealer’s dealers. This new version of Microcat will upgrade all current order processing system. Microcat MARKET will deliver tangible PartsImager users, with greater features and less installation productivity and financial savings to both the dealership and its complexity. Infomedia developers regularly met with GM parts customers, while extending ‘trading hours’ from 8am-5pm/Monday- specialists to ensure that this version of Microcat achieved the higher Friday, to ‘24/7’. standards that dealers and automakers want from an EPC today. Our teams learned a lot from the extensive dealer feedback received during nearly six months of field trials. We created certain new functionality for Microcat, as GM has some unique ways to utilise their parts data that give their dealers added depth and accessibility. The transition from PartsImager to Microcat commenced in August 2004 and is expected to conclude during Q3 FY2005. The transition is being managed by our North American distributor, Automotive Retail Group ADP-Dealer Services. IFM Europe Limited In October 2003, our European agent notified the Company that it was exercising its option to terminate the agency agreement. The termination notice caused us to immediately put plans into action to replace the services that it had provided, plus those we anticipated 10 www.infomedia.com.au www.infomedia.com.au 11 Microcat MARKET for Ford electronic catalogues division Gary Martin General Manager Electronic Catalogues Division it to provide, post 1 July 2004, when Microcat for European Ford North American distribution change dealers entered into its competitive period. During March 2004, we were informed by our distributor in the Management formed a multi-disciplined taskforce to successfully Americas, EDS, that its Automotive Retail Group (ARG) was going to deal with the situation. As a result of this work, we amongst other be acquired by ADP Inc., a large American IT company with significant things: established a wholly owned subsidiary, IFM Europe Limited, representation and influence in the automotive dealership market. to be the body in situ to direct our European operations and to liaise with our subscribers and licensors; contracted with European collections specialists, Intrum Justitia, to support our finance team’s expanded accounts receivable responsibilities; worked with Telstra to establish an innovative and affordable system of pan-European telecommunication links between our users and the Company; and recruited, trained and outfitted a professional international Customer Service Centre in Sydney – all of which was in place and As ARG was a division that had serviced Infomedia and our EPC distribution since August 2002, ADP invited the Company to assign that agreement to it and hence become our new distributor. Our first impression was that such a change would be positive for Microcat distribution. During the next 12 weeks or so, we met with ADP management to learn more about their company and to negotiate a suitable assignment document. In August 2004, we executed the operational by 1 July 2004. assignment to ADP for the duration of the original term. Training services Infomedia’s online support resources already lead the EPC industry. To provide an even better experience for our customers, we are now raising the bar for EPC training. Customer training is currently accessed in a number of ways, including self-paced computer based training (CBT), video-on- demand training, online interactive broadcast, and online user- group sites that operate in local languages at appropriate local times for dealership groups and individuals. Initially, the video-on-demand training and online interactive broadcasts will be provided to our European customers. To facilitate this world-class service, we have built three small online video training studios as part of our new international Customer Service Centre at Frenchs Forest. The first of these went online in August 2004. A user can participate in an interactive broadcast through their Internet browser. Participants can ask questions or give specific examples of things they wish to understand. We see training as an integral part of providing good customer service and securing good customer satisfaction. It is yet another feature that distinguishes Microcat from the competition. Electronic Catalogues Division Production team 12 www.infomedia.com.au Online training videos are created in house and delivered via the Internet for customers to access at any time Opportunities and challenges In terms of FY2005, it has its uncertainties particularly as they ECD began to positively address its new opportunities and challenges relate to the transition of the Ford Europe business from exclusive in the FY2004 and will continue to do so during the FY2005 year. to non-exclusive. At the time of this Report closing off for “We see training as an integral part of providing the level of subscription movement will be. However, I can say good customer service and securing good customer to you that whatever it may be, ECD will use that level to build a typesetting (late-August 2004), it is still too early to gauge what satisfaction. It is yet another feature that distinguishes bigger market upon. Microcat from the competition.” We did so in direct and obvious ways referred to above, such as: Aside from the temporary uncertainty associated with that transition, I am confident that our other markets for subscriptions contributing to the establishment of IFM Europe; readying the will continue to grow. new online Microcat products; and implementing a competitive marketing strategy in the European Ford dealer arena. Less obvious, however, was the maturing and cross-integration of many ECD functions such as sales, marketing, brand management and distribution, to begin to forge a united market-management force for the products of all the Company’s divisions. To achieve this, we have realigned resources in terms of staff responsibilities and we have also revisited fundamentals such as packaging and branding to Gary Martin further strengthen the key Infomedia brands. General Manager, Electronic Catalogues Division www.infomedia.com.au 13 data management division Michael Roach General Manager Data Management Division The Data Management Division (DMD) researches, processes and publishes technical repair-side data, illustrations and documentation to facilitate more cost effective vehicle servicing It was great to welcome Pennzoil to join the other 12 distributors who use our LRG, PCLube™ and NetLube™ products. On several occasions throughout the year, we were also able to assist a number by automotive dealers and independent repairers. of current customers by providing them with lubricant data to support their entry into new vertical product streams. As General Manager of DMD, I couldn’t be happier with the prospects for the Division. DMD had a strong 16 per cent revenue growth in FY2004, primarily through its traditional print publications and analytical consultancy. A small part of the growth came through the partial domestic introduction of our new Superservice Menus product. Before I report about that exciting new product, let me provide you with an update about the publication and analysis side of the business. Publications During the financial year we published the 43rd annual edition of the Datateck Lubrication & Tune-up Guide (LTG). This 968-page repair-side reference book is arguably the most widely-used guide of its kind in Australia. The (calendar year) 2004 edition went on sale in March and the first quarter sales of the guide are 107 per cent higher than those of the 2003 edition, despite having a higher cover price. Our analysts made several structural enhancements to the LTG format, such as removing the older carburettor and distributor 2004 Lubrication & Tune-Up Guide™ sections and updating them with the newer electronic fuel injection Partfinder® Whitegoods EPC specifications and wheel alignment sections. Of course, all the new model-year vehicles were added too. DMD creates and publishes the Partfinder® EPC for the appliance whitegoods industry. In FY2004, Whirlpool Australia Pty Ltd signed a “During the year, we won regular contracts to 3-year agreement for Partfinder to be supplied to their agents in the produce pricing, service and accessories guides for Holden and Toyota.” region. Whirlpool joins Electrolux in recognising and adopting the many advantages of our Partfinder EPC solution for their Australian and New Zealand appliance agents. I am confident that this product segment will continue to provide growth impetus for the Division, Our Lubricant Recommendation Guides™ (LRGs), which we produce for Australia’s leading lubricant product distributors also had a good year. The LRG is both a traditional (paper) and online database publication where one can find each distributor’s correct both domestically and overseas. Analytical consulting products for a range of machinery, including automobiles, jet skis, Our automotive analyst section is well recognised for its ability lawn mowers and chain-saws, to name a few. Our LRG is the data to produce accurate data. During the year, we won contracts source behind-the-scenes supporting the distributors’ product to produce pricing, service and accessories guides for Holden recommendation websites. and Toyota. 14 www.infomedia.com.au www.infomedia.com.au 15 We were awarded a parts cataloguing contract with Holden to catalogue data for their SUP (import) vehicles such as Astra, Barina and Vectra. Daewoo also awarded the Division with a parts cataloguing contract which involves both the cataloguing of parts data as well as supporting their dealer network with its parts enquiries. Like the others, this area of our business continues to grow as a result of the excellent service that DMD offers in the area of automotive research. Superservice Menus During FY2004, DMD launched a new and exciting application called Superservice Menus, which has the potential to become as widely used as Microcat, both domestically and internationally. Superservice Menus provides accurate, detailed service quotations in seconds Superservice Menus is a high-performance service quoting and prospects, when they look at the product, that the menus are of application that helps dealers provide an accurate, detailed, high quality and have been prepared by experts. competitive and profitable service quotation in seconds. It does this by combining in-depth DMD service repair research, vehicle identification information, and detailed repair checklists with its Opportunities unique interpretation application. Since joining Infomedia in 2000, the Data Management Division Within Australia, we currently produce Superservice Menus for Ford, (Datateck) has been making modest but steady revenue growth in our traditional and continuing endeavours of publications, analytical Mitsubishi and Toyota dealerships, and are piloting the product with consulting and whitegoods EPC. Daihatsu and Hyundai dealers. Response from North American and European interests for the product is also very encouraging During the past two years, we have also invested skill and financial and holds a lot of potential to make a material recurring revenue resources into the development of the innovative Superservice contribution in the coming years. Menus and a small portfolio of other online resources. This dual “Superservice Menus has the potential to become as widely used as Microcat, both domestically and internationally.” approach of investing in the future, while realising the worth of existing assets, is proving to be sound and shrewd leadership by our senior management team and the Board. Our staff in the Division are exceptionally committed to our success and have delivered quality products, while under the pressure of The substantial development work which is initially required to tight timelines to meet specific commercial windows of opportunity. create Superservice Menus for any given automotive franchise also I can say personally that it is an honour to work with them. I believe forms a significant barrier to entry. Our team of technical analysts we will realise the potential of all our DMD products, especially gathers information from six to eight different data sources, then that potential which Superservice Menus holds in store. analyses and processes it into individual service quotations, check- sheets and invoicing detail. We have raised the bar even higher by making the system multilingual and multi-franchise. The other main element that sets us apart from would-be competitors Michael Roach is the quality of our work. It is immediately apparent to customers General Manager, Data Management Division 14 www.infomedia.com.au www.infomedia.com.au 15 business systems division Damon Fieldgate General Manager Business Systems Division Infomedia’s Business Systems Division (BSD) develops and provides the comprehensive information and data processing solutions required to operate and manage today’s complex full- service automotive dealerships. • AutoLedgers is a powerful high-end DMS suitable for the largest to medium-sized automotive dealerships. Its primary form of delivery is via an online ASP method. It is a mature and proven system that is continuously improved and serves all areas of dealership business. A number of new features were added during FY2004 These systems, referred to as dealer management systems (DMS), to keep pace with the changing needs of our clients and the help account for all aspects of dealership operations and processes: competitive nature of the market. from inventory control to accounting statements; from vehicle sales contract generation to customer relationship management; from OEM reporting to service workshop scheduling. • Nova is also a very effective DMS that is primarily used by medium to smaller dealerships in Australia, and as of FY2005, New Zealand. While it also supports all areas of a dealer’s business, its efficient and compact design makes it easy for a dealership with limited “DMS customer expectations of the software, the local IT resources to operate reliably day after day. In FY2004, services and the supplier are rising. Infomedia is well the Nova development team completed version 10 of the system, prepared to meet these changing expectations.” which introduced a dynamic new graphical user interface. BSD is a leader in domestic DMS sales and installations. Our AutoLedgers and Nova brand systems have positive reputations among their users. During FY2004 the Division contracted for new dealership installations, up to the limit of its current installation DMS customer expectations of the software, the services and the supplier are rising. Infomedia is well prepared to meet these changing expectations and, to some degree, is in fact driving them. For example, we have set the commercial agenda by: capacity, and experienced a growth of 25 per cent over FY2003. • publishing transparent subscription prices, which allow dealers to In early FY2003 the Division commenced a process of changing the way we had previously gone to market with our products. We determine a precise price for DMS ‘subscriptions’ or ‘seats’, fully inclusive of licensing, upgrades and support; began to withdraw from selling computer hardware, third party • quickly incorporating new obligations imposed by their OEM or software and telecoms facilities, and transitioned solely to selling by changes in legislation, without an extra charge; and and supporting its DMS software solutions. With the professional aid of Infomedia’s corporate systems team we had, by the end • unbundling computer hardware and telecoms, while supporting dealers to purchase them from a best-price supplier; to mention just a few ways. of FY2004, succeeded in making the withdrawal from non-core activities and, in particular, telecoms provisioning. In the process, an improved telecommunication strategy was implemented that gave the dealers greater bandwidth at a lower cost. Doing so made our core strategy of delivering our AutoLedgers DMS via online access more affordable too. Our annual revenue was reduced by approximately $750,000 as we phased out these non-core activities. However, it boosted our focus onto our core business of software development, sales and support which, by the end of the financial year, had delivered net revenue growth, greater customer satisfaction and less staff and management distraction on low margin activities. To give you a very broad understanding of where our AutoLedgers and Nova systems are positioned, let me offer the following: Infomedia’s Future Motors™ Showcase replicates the operational structures of a dealership and showcases the entire Infomedia product portfolio 16 www.infomedia.com.au www.infomedia.com.au 17 On track Building for the future – rising to the challenge Even though Infomedia has only been involved with DMS since 2000, A full-service automotive dealership is a complex, highly regulated its acceptance, influence and reputation has grown remarkably in and dynamic business. This is true both domestically and that short time to where we are one of the top providers in Australia. internationally. While we believe that AutoLedgers and Nova are We have seen a remarkable growth in acceptance of our DMS the best Australian dealer management systems in their respective products during the FY2004 year. So much so that at the time of classes, we know that we cannot rest on our laurels. writing, the FY2005 sales pipeline is already nearing our limit for accepting new customers. “One of the biggest influences on prospective clients when considering a new system is the opinion and experience of currently satisfied customers – these are our best references.” During the year, a number of influential dealers signed to make the transition to one of our dealer management systems, including: AC To that end, the Company makes a strong annual investment in the continuous improvement of our current products, as well as complete product renewal when it comes to developing the next generation dealership management platform. Currently our team of programmers, analysts and system designers are working on such a next generation system which, in my opinion, will set a much higher competitive bar for comprehensiveness, system performance and ease of functionality than anything on offer today. This internationally focused DMS will bring the power of online computing to dealers in McGrath Group, Bradstreet Group, Essendon Nissan, Tony Leahey many regions beyond our home shores. Ford, and SunFord, to name just a few. Our new FY2004 DMS subscribers are anticipated to add over 800 new ‘seats’ by the time of their full installation. Our business principles at BSD are simple: 1) Conduct our business affairs ethically; In addition, many our of current DMS users began to subscribe to a number of our new speciality extension products, such as our AutoMotives customer/showroom management application, our AutoTerm® point and click terminal emulator, and our 2) Add value to each customer’s business by delivering innovative products and reliable services; 3) Nurture an environment of mutual respect and honest new AutoDocs™ electronic stationery management system. communication between our customers and our staff; and Subscriptions to our range of Auto-extension products grew significantly across the range. 4) Charge fair and transparent prices. Because we can clearly see that the domestic demand for an These simple principles, plus our great products, our professional Infomedia dealer management system is on the rise, we have been and committed staff and our satisfied customers, fill me with actively recruiting and managing the development of an expanded excitement for our potential and the future. customer field support team. During the year we consolidated our east and west coast helpdesks into a single operation. These human resource commitments are making Infomedia’s DMS support stand out at a time when other competitors are cutting back on customer service activities. We know that the way to increase our number of clients is to provide superior products and exceptional customer support. One of the biggest influences on prospective clients when considering a new system is the opinion and experience of currently satisfied customers – these are our best references. Damon Fieldgate General Manager, Business Systems Division 16 www.infomedia.com.au www.infomedia.com.au 17 directors’ report Directors were in office from the beginning of Directors were in office from the beginning the financial year until the date of this Report, of the financial year until the date of this report, unless otherwise stated. unless otherwise stated. Barry Ford Non-executive Director (Chairman of Audit & Risk Committee) Geoffrey Henderson Non-executive Director (Chairman of Corporate Governance Committee) Andrew Pattinson Executive Director Barry Ford was appointed to the Infomedia Board of Directors on 19 June 2000. Mr Ford was Director of Finance and Chief Financial Officer of Goodman Fielder Ltd from 1997 to 1999 and has sat on a number of boards, including the Island Food Company and Yallourn Energy where he was Chairman of the Audit Committee. Mr Ford held various financial management positions at General Motors Corporation between 1964 and 1989, including Director, Overseas Financial Planning & Analysis at GM Corp USA from 1984 to 1986 and Director of Finance and Strategic Planning at General Motors-Holden from 1987 to 1989. Mr Ford’s experience has been mainly in the automotive industry and in food processing and distribution. His core expertise is in finance and manufacturing. Mr Ford also serves on Infomedia’s Remuneration & Nomination Committee. Geoffrey Henderson was appointed to Andrew Pattinson was appointed to the the Infomedia Board of Directors on 25 Board of Directors on 31 October 2001. February 2003. Mr Henderson is a qualified He has played a leading role in Infomedia accountant and has had an extensive for over 16 years, with six of these as career spanning positions in Australia, New Director of Production and Operations in Zealand, Europe and North America. He Sydney and two years as General Manager worked in a number of financial positions of the Data Management Division in for Olympic Tyres in Melbourne for Melbourne. He moved back to Sydney eight years and then for the Ford Motor in January 2002 to take on the role of Company for 30 years. During his time Infomedia’s Vice-CEO and subsequently with Ford, Mr Henderson worked not relocated to the United Kingdom to become only in the Finance Division but also held Managing Director of IFM Europe Ltd. senior positions in the Supply and Parts and Service Divisions. Immediately prior to his retirement from Ford, Mr Henderson headed up the company’s Asia Pacific Parts and Service operation which covered Ford’s parts and service activities in 12 countries including Japan, South Africa, China, India and Australia. Mr Henderson also serves on Infomedia’s Audit & Risk Committee. 18 18 www.infomedia.com.au www.infomedia.com.au www.infomedia.com.au 19 Frances Hernon Non-executive Director (Chairman of Remuneration & Nomination Committee) Richard Graham Chairman and CEO Myer Herszberg Non-executive Director Frances Hernon was appointed to the Richard Graham has held senior Myer Herszberg has been a Director of Infomedia Board of Directors on 19 June management positions in the American Infomedia since 1992. Mr Herszberg is 2000. Ms Hernon has extensive experience and Australian computer industry since the founder of Melbourne’s Denman in media, publishing, marketing and 1977. Mr Graham has been Managing Audio chain and has extensive consumer technology. She has held senior editorial Director/CEO and Chairman of Infomedia electronics experience. He was active in positions at News Ltd and Murdoch since 1988. His previous positions within bringing home computers to Australia in Magazines and was General Manager, the technology arena include: Marketing the early 1980s and has also brought many Harrison Communications, Director Director, ComputerLand Corp (USA) other leading edge electronic products to of Publicity at Channel Ten, Managing – 1977; General Manager, ComputerLand Australia. He has extensive experience in Editor of the NRMA’s member magazine Australia Pty Ltd – 1980; Founder/Managing the commercial property market, and is The Open Road, Manager, Business Director of Wiser-Microsoft – 1982; active in a number of community service Communications for NRMA, and Senior Founder/Managing Director of Osborne organisations. Account Manager, Group IT&T for the Computers (Australia) – 1982 and Founder/ Mr Herszberg serves on the company’s Insurance Australia Group (IAG). Ms Managing Director of Telecorp Pty Ltd Audit & Risk, Corporate Governance, Hernon is currently Corporate Affairs – 1985. His personal interests include and Remuneration & Nomination Manager for Nestlé Australia Ltd. Ms matters of the environment, nutrition, civil Committees. Hernon also serves on Infomedia’s liberties, and democratic process. Corporate Governance Committee. 18 www.infomedia.com.au www.infomedia.com.au www.infomedia.com.au 19 19 directors’ report continued INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE As at the date of this report, the interests of the Directors in the shares and options of the Company were: Infomedia Ltd Ordinary Shares Options over Ordinary Wiser Laboratory Pty Limited Yarragene Pty Limited Andrew Pattinson Wiser Centre Pty Limited Richard Graham Barry Ford Frances Hernon Geoffrey Henderson fully paid 100,277,501 39,421,599 4,407,716 1,000,000 926,559 116,666 5,000 - Shares - - 582,000 - - - - - Richard Graham is the sole director and beneficial shareholder of Wiser Laboratory Pty Limited. Richard Graham is a director of Wiser Centre Pty Limited, trustee for the Wiser Centre Pty Ltd Superannuation Fund (formerly Sidford Superannuation Fund). Myer Herszberg is a director and major shareholder of Yarragene Pty Limited. PRINCIPAL ACTIVITIES Infomedia Ltd is a company limited by shares that is incorporated and domiciled in Australia. The principal activities during the year of entities within the consolidated entity were: • developer and supplier of electronic parts catalogues for the automotive industry globally; • information management, analysis and creation for the domestic automotive, whitegoods and oil industries; and • the provision of dealer management systems for the automotive industry. There have been no significant changes in the nature of those activities during the year. EMPLOYEES The consolidated entity employed 205 (2003: 171) full time employees as at 30 June 2004. DIVIDENDS Dividends paid or declared during the year: • Interim dividend - 1.9 cents per share - fully franked • Final dividend - 1.9 cents per share - fully franked NET TANGIBLE ASSETS PER SECURITY The consolidated entity’s net tangible assets per security are as follows: • Net tangible assets per share at 30 June 2004 • Net tangible assets per share at 30 June 2003 REVIEW AND RESULTS OF OPERATIONS $’000 6,170 6,174 Cents 8.6 4.9 The consolidated entity experienced improvement in sales and profits over the prior year. Revenue from ordinary activities increased by 16.5% and profit from ordinary activities after income tax expense increased by 12.9%. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There has been no significant change in the state of affairs of the Company since the last Directors’ report. 20 www.infomedia.com.au SIGNIFICANT EVENTS AFTER THE BALANCE DATE There has been no matter or circumstance that has arisen since the end of the financial year, that has significantly affected the operations of the Company, the results of those operations, or the state of affairs of the Company. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Directors anticipate the 2005 financial year will present some material challenges to the Company as it transitions from exclusive to non- exclusive in its largest EPC market – European Ford dealers – and as higher currency exchange rates make a negative impact on the Company’s revenues and profits. The Directors also anticipate that partially offsetting this negative impact will be: • continued expansion of subscription revenues for Infomedia’s products in selected regions; • obtaining broad market acceptance of Infomedia’s Internet trading versions of Microcat; and • improving performance from non-EPC divisions. Whilst there are several uncertain factors at the time of filing this report which can affect the Company’s FY2005 revenue and profit potential, the Directors think it would be prudent to anticipate that the year’s revenue and profits will decline rather than rise. The longer term outlook for the Company remains positive and growth oriented. ENVIRONMENTAL REGULATION AND PERFORMANCE The consolidated entity is not subject to any particular or significant environmental regulation under a law of the Commonwealth of Australia or of a State or Territory. SHARE OPTIONS Unissued shares At the date of this report, there were 6,908,000 unissued ordinary shares under options. Refer to notes 27 and 29 for further details. Upon the recommendation of the Remuneration & Nomination Committee, following its review of ASX CGC Recommendation 9.3 relating to Non- executive Director remuneration, during the 2004 financial year Geoffrey Henderson voluntarily surrendered 100,000 options. Shares issued as a result of the exercise of options During the financial year, employees have exercised the option to acquire 16,000 fully paid ordinary shares in Infomedia Ltd at a weighted average exercise price of $0.88. Since the end of the financial year, no further options have been exercised. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the year the Company paid a premium in relation to insuring Directors and other officers against liability incurred in their capacity as a Director or officer of the Company. The insurance contract specifically prohibits the disclosure of the nature of the policy and amount of premium paid. DIRECTORS’ AND OTHER OFFICERS’ EMOLUMENTS The Remuneration & Nomination Committee of the Board of Directors is responsible for reviewing compensation arrangements for the Directors and the executive team. The Remuneration & Nomination Committee assesses the appropriateness of the nature and amount of these emoluments on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. The nature and amount of executive directors’ and officers’ emoluments was determined with regard to a number of factors, including the individual’s specific responsibilities and performance, market benchmarking, and the Company’s overall financial performance. Details of the nature and amount of each element of the emolument of each Director of the Company and each of the five executive officers of the Company receiving the highest emolument for the financial year are as follows: www.infomedia.com.au 21 directors’ report continued EMOLUMENTS OF DIRECTORS OF INFOMEDIA LTD Annual Emoluments Long Term Emoluments Base fee $ 237,445 197,697 42,800 42,800 42,800 42,800 Bonus $ 18,000 - - - - - Other $ - 28,554 - - - - Andrew Pattinson Richard Graham Myer Herszberg Barry Ford Frances Hernon Geoffrey Henderson Options Number Granted - - - - - - Amortised Cost $ 33,760 - - - - - Super- annuation $ 21,033 17,635 3,875 3,875 3,875 3,875 EMOLUMENTS OF EXECUTIVES OF INFOMEDIA LTD Annual Emoluments Long Term Emoluments Options Base fee $ 158,304 147,616 145,104 140,929 108,114 Bonus $ 24,000 24,000 12,000 12,000 6,000 Other $ 1,497 19,650 - - - Employee Share Plan Number Granted $ 2,000 2,000 2,000 2,000 2,000 450,000 - - - - Amortised Super- Cost $ 8,149 33,760 5,220 33,760 3,480 annuation $ 13,947 13,113 12,816 12,519 9,619 Guy Bryant Gary Martin Peter Adams Nick Georges Michael Roach (a) The category ‘Other’ includes the value of any non-cash benefits provided. (b) The value attributed to the employee share plan is calculated as the total number of shares allotted multiplied by the weighted average market price of the five trading days on the Australian Stock Exchange preceding first date of offer. (c) Options granted as part of remuneration have been valued using a Black Scholes option pricing model which takes into account factors such as the exercise price, the current level of volatility of the underlying share price, the dividend yield, share price at grant date, risk free rate and the time to maturity of the option. 22 www.infomedia.com.au DIRECTORS’ MEETINGS The number of meetings of Directors (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director were as follows: Directors’ Meetings Audit & Risk Corporate Governance Remuneration & Nomination Meetings of Committees 9 9 9 5 9 9 9 4 - 4 - 3 4 - 4 - 4 - 4 - 4 5 - - - 5 4 5 Number of meetings held: Number of meetings attended: Richard Graham Geoffrey Henderson Andrew Pattinson Myer Herszberg Barry Ford Frances Hernon ROUNDING The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC class Order 98/0100. The Company is an entity to which the Class Order applies. TAX CONSOLIDATION Effective 1 July 2002, for the purposes of income taxation, Infomedia Ltd and its 100% owned Australian subsidiaries have formed a tax consolidated group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries on a pro-rata basis. In addition the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. CORPORATE GOVERNANCE In recognising the need for high standards of corporate behaviour and accountability, the Directors of Infomedia Ltd support and have adhered to the principles of corporate governance. The Company’s Corporate Governance Statement begins on page 64. Signed in accordance with a resolution of the Directors. Richard David Graham Chairman Sydney, 25 August 2004 www.infomedia.com.au 23 statement of financial performance Year Ended 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 2004 $’000 2003 $’000 2004 $’000 2003 $’000 Revenue from ordinary activities Expenses from ordinary activities excluding borrowing costs Borrowing costs expense Profit from ordinary activities before income tax expense Income tax expense relating to ordinary activities Profit from ordinary activities after income tax expense 2(i) 2(ii) 2(iii) 3 5 73,005 (42,994) 62,652 (36,067) 68,817 (38,361) 60,584 (33,730) (283) (348) (283) (348) 29,728 (9,042) 26,237 (7,912) 30,173 (9,074) 26,506 (7,888) 20,686 18,325 21,099 18,618 Net exchange difference on translation of financial statements of foreign controlled entity Total revenues, expenses and valuation adjustments attributable to Infomedia Ltd and recognised directly in equity Total changes in equity other than those resulting from transactions with owners as owners 9 9 - - - - - - 20,695 18,325 21,099 18,618 Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Franked dividends per share (cents per share) 23 23 4 6.37 6.36 3.80 5.65 5.65 3.40 24 www.infomedia.com.au www.infomedia.com.au 25 statement of financial position At 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD CURRENT ASSETS Cash Receivables Inventories Property held for resale Other TOTAL CURRENT ASSETS NON-CURRENT ASSETS Receivables - wholly owned group Investments Property, plant and equipment Intangible assets Deferred research and development costs Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Payables Interest-bearing liabilities Provisions excluding tax liabilities Provision for income tax Deferred revenue TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing liabilities Provisions excluding tax liabilities Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained profits TOTAL EQUITY 2004 $’000 6,887 9,389 95 1,534 364 2003 $’000 19,352 9,313 106 - 540 2004 $’000 6,333 8,565 68 - 328 2003 $’000 19,001 8,807 86 - 529 18,269 29,311 15,294 28,423 - - 23,026 23,671 3,708 748 51,153 69,422 5,103 - 1,140 1,673 1,503 9,419 4,173 704 3,605 8,482 17,901 51,521 - - 7,082 27,265 2,748 1,206 38,301 67,612 3,823 2,384 963 1,176 5,304 13,650 8,128 680 2,004 10,812 24,462 43,150 23,180 247 5,344 19,547 3,708 678 52,704 67,998 4,713 - 950 1,673 1,057 8,393 4,173 296 3,605 8,074 16,467 51,531 6,742 - 4,602 22,520 2,748 1,040 37,652 66,075 3,693 2,384 808 1,155 4,820 12,860 8,128 354 1,977 10,459 23,319 42,756 17,488 17,474 17,488 17,474 9 34,024 51,521 - 25,676 43,150 - 34,043 51,531 - 25,282 42,756 6 7 8 9 10 12 13 14 15 16 17 18 19 20 21 22 5 5 24 www.infomedia.com.au www.infomedia.com.au 25 statement of cash flows Year Ended 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Borrowing costs Income tax paid NET CASH FLOWS FROM OPERATING ACTIVITIES 24 (a) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of EDS PartsImager catalogue business Purchase of Australian Windows Publishing business Purchase of VM Computer Services business Purchase of shares in controlled entity NET CASH FLOWS USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings Loan to controlled entity for property purchase Dividends paid on ordinary shares Proceeds from exercise of options by employees Finance lease principal NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES NET (DECREASE)/INCREASE IN CASH HELD Add opening cash brought forward CLOSING CASH CARRIED FORWARD 24 (b) 2004 $’000 2003 $’000 2004 $’000 2003 $’000 67,616 (36,879) 428 (283) (4,441) 26,441 (21,101) 2,515 - - - - 60,551 (30,463) 723 (348) (7,225) 23,238 (1,332) - (22,076) (596) (1,583) 63,771 (32,592) 410 (283) (4,384) 26,922 (3,262) 1,770 - - - - (247) 58,256 (29,692) 845 (348) (7,204) 21,857 (1,296) - (22,076) (596) - - (18,586) (25,587) (1,739) (23,968) 7,000 (14,982) - 21,779 (9,074) - (12,338) (9,730) - (59) 7,000 (14,982) (17,531) (12,338) 14 (14) 2,916 (37,851) 567 18,785 19,352 (12,668) 19,001 6,333 14 (14) (20,320) (12,465) 19,352 6,887 21,779 (9,074) - (9,730) - (59) 2,916 805 18,196 19,001 26 www.infomedia.com.au www.infomedia.com.au 27 notes to the financial statements 30 June 2004 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of accounting The financial statements have been prepared in accordance with the historical cost convention. The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001 which includes applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with. (b) Changes in accounting policies The accounting policies adopted are consistent with those of the previous year. (c) Principles of consolidation The consolidated financial statements are those of the economic entity, comprising Infomedia Ltd (the parent entity) and all entities which Infomedia Ltd controlled from time to time during the year and at balance date. Information from the financial statements of subsidiaries is included from the date the parent company obtains control until such time as control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the parent company has control. Subsidiary acquisitions are accounted for using the purchase method of accounting. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. (d) Foreign currencies Translation of foreign currency transactions Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of exchange ruling at the date of the transaction. Amounts payable to and by the entities within the consolidated entity that are outstanding at the balance date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial year. Except for certain specific hedges and hedges of foreign currency operations, all resulting exchange differences arising on settlement or re-statement are brought to account in determining the profit or loss for the financial year, and transaction costs, premiums and discounts on forward currency contracts are deferred and amortised over the life of the contract. 26 www.infomedia.com.au www.infomedia.com.au 27 notes to the financial statements continued 30 June 2004 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Forward exchange contracts The consolidated entity enters into forward exchange contracts where it agrees to sell specified amounts of foreign currencies in the future at a predetermined exchange rate. The objective is to match the contract with anticipated future cash flows from sales and purchases in foreign currencies, to protect the consolidated entity against the possibility of loss from future exchange rate fluctuations. The forward exchange contracts are usually for no longer than 12 to 24 months. Forward exchange contracts are recognised at the date the contract is entered. Exchange gains or losses on forward exchange contracts are charged to the profit and loss except those relating to hedges of specific commitments which are deferred and included in the measurement of the sale or purchase. Translation of financial reports of overseas operations All overseas operations are deemed self-sustaining, as each is financially and operationally independent of Infomedia Ltd. The financial reports of overseas operations are translated using the current rate method and any exchange differences are taken directly to the foreign currency translation reserve. (e) Cash and cash equivalents Cash on hand and in banks and short-term deposits are stated at nominal values. For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within two working days, net of outstanding bank overdrafts. (f) Trade and other receivables Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectable debts. An estimate for doubtful debts is made when collection is no longer probable. Bad debts are written-off as incurred. Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as income on an accrual basis. (g) Investments All non-current investments are carried at the lower of cost and recoverable amount. (h) Inventories Manufacturing Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: • Raw materials - purchase cost on a first-in-first-out basis; and • Work-in-progress - cost of direct labour and materials. (i) Property held for resale Freehold property and other assets held for resale are held are valued at the lower of cost and net realisable value. (j) Recoverable amount Non-current assets are not carried at an amount above their recoverable amount, and where carrying values exceed this recoverable amount assets are written down. 28 www.infomedia.com.au www.infomedia.com.au 29 (k) Property, plant and equipment Cost and valuation Property, plant and equipment are carried at cost. Depreciation Depreciation is provided on a straight line basis on all property, plant and equipment, other than freehold land. Major depreciation periods are: Freehold buildings: Leasehold improvements: Plant and equipment: Plant and equipment under lease: (l) Leases 2004 40 years 5 to 20 years 3 to 15 years 3 years 2003 40 years 5 to 20 years 3 to 15 years 3 years Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis. Contingent rentals are recognised as an expense in the financial year in which they are incurred. Finance leases Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the Group are recognised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised. Capitalised lease assets are depreciated over the estimated useful life of the assets. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to profit and loss. The cost of improvements to or on leasehold property is recognised, disclosed as leasehold improvements, and amortised over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is the shorter. (m) Intangibles Goodwill Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of acquisition of a business or shares in a controlled entity. Goodwill is amortised by the straight-line method over the period during which benefits are expected to be received. This is taken as being 10 years. Intellectual Property Intellectual property relates to copyright and software codes over key products. Intellectual property is amortised over its useful life, being 10 years. (n) Trade and other payables Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity. Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accrual basis. 28 www.infomedia.com.au www.infomedia.com.au 29 notes to the financial statements continued 30 June 2004 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (o) Provisions Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation. A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before the reporting date. (p) Revenue in advance Certain contracts allow annual subscriptions to be invoiced in advance. The components of revenue relating to the subscription period beyond balance date are recorded as a liability. (q) Loans and borrowings All loans are measured at the principal amount. Interest is charged as an expense as it accrues. Finance lease liability is determined in accordance with the requirements of AASB 1008: Leases. (r) Share capital Ordinary share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. (s) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Subscriptions Subscription revenue is recognised when the copyright article has passed to the buyer with related support revenue being recognised over the service period. Where the copyright article and related support revenue are inseparable then the revenue is recognised over the service period. Interest Control of a right to receive consideration for the provision of, or investment in, assets has been attained. (t) Cost of goods sold Cost of goods sold includes the direct cost of raw materials and agency costs associated with the manufacture and distribution of the product. (u) Taxes Income taxes Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of being realised. 30 www.infomedia.com.au www.infomedia.com.au 31  Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: • where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Tax consolidation Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries on a pro-rata basis. In addition the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. (v) Employee entitlements Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee entitlements expected to be settled within 12 months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee entitlement liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to government bonds which have terms to maturity approximating the terms of the related liability are used. Employee entitlements expenses and revenues arising in respect of the following categories: • wages and salaries, non-monetary benefits, annual leave, long service leave and other leave entitlements; and • other types of employee entitlements are charged against profits on a net basis in their respective categories. The value of shares issued under the employee share scheme described in note 27 is not being charged as an employee entitlement expense. In respect of the consolidated entity’s accumulated benefits superannuation plans, any contributions made to the superannuation funds by entities within the consolidated entity are charged against profits when due. (w) Research and development costs Research and development costs are expensed as incurred, except where the future benefits are recoverable beyond any reasonable doubt. When research and development costs are deferred such costs are amortised over future periods on a basis related to expected future benefits. Unamortised costs are reviewed at each balance date to determine the amount (if any) that is no longer recoverable and any amount identified is written off. 30 www.infomedia.com.au www.infomedia.com.au 31 notes to the financial statements continued 30 June 2004 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (x) Earnings per share Basic earnings per share is determined by dividing the profit from ordinary activities after related income tax expense by the weighted average number of ordinary shares outstanding during the financial year. Diluted EPS is calculated as net profit attributable to members, adjusted for: • cost of servicing equity (other than dividends); • the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and • other non-discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. 32 www.infomedia.com.au www.infomedia.com.au 33 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 2004 $’000 2003 $’000 2004 $’000 2003 $’000 2. PROFIT FROM ORDINARY ACTIVITIES Profit from ordinary activities before income tax expense includes the following revenues and expenses whose disclosure is relevant in explaining the financial performance of the entity: (i) Revenues from ordinary activities Sales revenue Interest revenue - wholly owned group - other persons/corporations Total interest revenue Gross proceeds on sale of non current assets Foreign currency exchange gain Other revenue Revenues from ordinary activities (ii) Expenses from ordinary activities excluding borrowing costs Cost of goods sold Salaries and wages (including on-costs) Depreciation of non-current assets - Buildings - Leasehold improvements - Office equipment - Furniture and fittings - Plant and equipment - Plant and equipment under lease Total depreciation of non-current assets Amortisation of non-current assets - Goodwill - Intellectual property - Deferred research and development costs Total amortisation of non-current assets Net book value of non-current assets disposed Management fee paid to controlled entities Bad and doubtful debts Operating lease rental Foreign currency exchange loss Foreign currency contract costs amortised Costs incurred in establishing European operations Industrial relations dispute resolution including legal costs Costs incurred for non-renewal of overseas distribution services Costs incurred for defending an international trademark Other expenses Expenses from ordinary activities 69,567 61,813 65,715 59,623 - 428 428 2,515 193 302 73,005 14,604 15,191 267 571 1,022 68 293 - - 723 723 - - 116 62,652 12,647 12,478 62 96 935 70 243 6 726 411 1,137 1,770 195 - 68,817 13,980 12,291 5 531 904 64 293 - 141 704 845 - - 116 60,584 12,306 10,438 7 55 815 67 243 6 2,221 1,412 1,797 1,194 1,276 1,829 771 3,876 1,893 - 103 563 - 345 487 - - - 1,129 1,492 732 3,353 - - 66 606 291 374 - 206 909 282 805 1,679 771 3,255 1,214 1,097 103 903 - 345 - - - - 684 1,455 732 2,871 - 1,097 65 684 291 374 - 206 909 282 3,711 42,994 3,443 36,067 3,376 38,361 3,013 33,730 32 www.infomedia.com.au www.infomedia.com.au 33 notes to the financial statements continued 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 2004 $’000 2003 $’000 2004 $’000 2003 $’000 2. PROFIT FROM ORDINARY ACTIVITIES (CONTINUED) (iii) Borrowing costs Interest expense - other corporations Finance charges - lease liability Borrowing costs (iv) Profit on sale of non current assets Gross proceeds from the sale of non current assets Net book value of non-current assets disposed Profit on sale of non-current assets (v) Research & Development Costs (included within item 2(ii) above) Total research and development costs incurred during the period Less: research and development costs deferred Net research and development costs expensed 14 3. INCOME TAX The prima facie tax on operating profit differs from the income tax provided in the financial statements as follows: Prima facie tax on operating profit Tax effect of permanent differences: Legal expense Entertainment Non-deductible depreciation Amortisation of intangible assets Additional research and development deduction Intellectual property - copyright deduction Other Over provision of previous year Income tax expense attributable to operating profit 283 - 283 2,515 (1,893) 622 3,551 (1,731) 1,820 8,918 152 35 80 470 (421) (24) (2) (166) 9,042 346 2 348 - - - 283 - 283 1,770 (1,214) 556 346 2 348 - - - 2,091 (977) 1,114 3,551 (1,731) 1,820 2,091 (977) 1,114 7,871 9,052 7,951 44 28 2 399 (159) (24) - (249) 7,912 152 32 2 319 (421) (24) - (38) 9,074 44 25 2 267 (159) (24) - (218) 7,888 34 www.infomedia.com.au www.infomedia.com.au 35 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 4. DIVIDENDS PROPOSED OR PAID (a) Dividends paid during the year Franked interim - 1.90 cents (2003:1.50) per share Final franked dividend - (2003: 1.90 cents) Total dividends paid during the year (b) Dividends proposed and not recognised as a liability: Final franked dividend - 1.90 cents (2003: 1.90) per share The tax rate at which dividends were franked is 30% Amount of franking credits available for the subsequent financial year are: - franking account balance as at the end of the financial year - franking credits that will arise from the payment of income tax iiiiiiipayable as at the end of the financial year The tax rate at which paid dividends have been franked is 30% (2003: 30%). Dividends proposed will be franked at the rate of 30% (2003: 30%). 5. RETAINED PROFITS AND RESERVES (a) Retained profits Balance at the beginning of the year Profit from ordinary activities after income tax expense Adjustment arising from adoption of revised accounting standard: AASB1044: Provisions, Contingent Liabilities and Contingent Assets Total available for appropriation Dividends provided for or paid Balance at the end of the year 2004 $’000 6,170 6,168 12,338 2003 $’000 4,866 4,864 9,730 2004 $’000 6,170 6,168 12,338 2003 $’000 4,866 4,864 9,730 6,174 6,168 6,174 6,168 9,216 5,340 1,673 10,889 1,155 6,495 25,676 20,686 - 46,362 (12,338) 34,024 12,217 18,325 4,864 35,406 (9,730) 25,676 25,282 21,099 - 46,381 (12,338) 34,043 11,530 18,618 4,864 35,012 (9,730) 25,282 34 www.infomedia.com.au www.infomedia.com.au 35 notes to the financial statements continued 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 2004 $’000 2003 $’000 2004 $’000 2003 $’000 5. RETAINED PROFITS AND RESERVES (CONTINUED) (b) Foreign currency translation reserve (i) Nature and purpose of reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of self-sustaining operations. (ii) Movement in reserve Balance at the beginning of the year Gain on translation of overseas controlled entity Balance at end of the year 6. RECEIVABLES (CURRENT) Trade debtors Provision for doubtful debts Other debtors Net foreign currency forward contracts receivable (a) Terms and conditions relating to the above financial instruments are set out in Note 33. 7. INVENTORIES (CURRENT) Raw materials At cost Total inventories at the lower of cost and net realisable value 8. OTHER CURRENT ASSETS Prepayments 9. RECEIVABLES (NON-CURRENT) Wholly owned group - subsidiary entities - 9 9 8,486 (140) 8,346 278 765 9,389 95 95 364 364 - - - 6,240 (49) 6,191 127 2,995 9,313 106 106 540 540 - - - 7,653 (140) 7,513 287 765 8,565 68 68 328 328 - - - 5,736 (49) 5,687 125 2,995 8,807 86 86 529 529 31 - - 23,180 6,742 36 www.infomedia.com.au www.infomedia.com.au 37 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 2004 $’000 2003 $’000 2004 $’000 2003 $’000 10. INVESTMENTS (NON-CURRENT) Investments at cost comprise: Controlled entities - unlisted Total investments in balance sheet 11 - - - - 11. INTERESTS IN SUBSIDIARIES Name Country of Percentage of equity interest incorporation held by the consolidated entity IFM Europe Ltd - ordinary shares Infomedia Investments Pty Ltd United Kingdom - ordinary shares - $2 only Australia Datateck Publishing Pty Ltd - ordinary shares - $4 only Australia AutoConsulting Pty Ltd - ordinary shares - $1 only Australia 2004 % 2003 % 100 100 100 100 - 100 100 100 247 247 247 - - - 247 - - - - - - - 36 www.infomedia.com.au www.infomedia.com.au 37 notes to the financial statements continued 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 2004 $’000 17,531 (210) 17,321 2,664 (419) 2,245 19,566 4,691 (2,582) 2,109 471 (121) 350 2,325 (1,324) 1,001 - - - 3,460 27,682 (4,656) 23,026 2003 $’000 2,860 (119) 2,741 1,367 (301) 1,066 3,807 4,291 (2,241) 2,050 592 (221) 371 1,899 (1,045) 854 165 (165) - 3,275 11,174 (4,092) 7,082 2004 $’000 - - - 2,391 (283) 2,108 2,108 4,024 (2,130) 1,894 449 (108) 341 2,325 (1,324) 1,001 - - - 3,236 9,189 (3,845) 5,344 2003 $’000 647 (31) 616 1,115 (205) 910 1,526 3,817 (1,907) 1,910 571 (213) 358 1,847 (1,039) 808 165 (165) - 3,076 8,161 (3,559) 4,602 12. PROPERTY, PLANT AND EQUIPMENT Freehold land and buildings At cost Provision for depreciation Leasehold improvements At cost Provision for amortisation Total land and buildings Office equipment At cost Provision for depreciation Furniture & fittings At cost Provision for depreciation Plant and equipment At cost Provision for depreciation Plant and equipment under lease At cost Provision for amortisation Total plant and equipment Total property, plant and equipment At cost Provision for depreciation and amortisation Total written down amount (a) Valuations The fair values of freehold land and buildings have been determined by reference to an independent valuation performed on a market value basis being the estimated amounts for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of land and buildings at the valuation date, being 7 June 2004, was $17,500,000. 38 www.infomedia.com.au www.infomedia.com.au 39 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 12. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) 2004 $’000 2003 $’000 2004 $’000 2003 $’000 (b) Reconciliation of property, plant and equipment carrying values Freehold land and buildings Carrying amount - opening balance Additions Disposals Transfer to property held for resale Depreciation Carrying amount - closing balance Leasehold Improvements Carrying amount - opening balance Additions Disposals Transfer to property held for resale Depreciation Carrying amount - closing balance Office equipment Carrying amount - opening balance Additions Additions through acquisition of business Depreciation Carrying amount - closing balance Furniture and fittings Carrying amount - opening balance Additions Additions through acquisition of business Depreciation Carrying amount - closing balance Plant and equipment Carrying amount - opening balance Additions Additions through acquisition of business Disposals Depreciation Carrying amount - closing balance Plant and equipment under lease Carrying amount - opening balance Depreciation Carrying amount - closing balance 2,741 17,531 (1,247) (1,437) (267) 17,321 1,066 1,945 (98) (97) (571) 2,245 2,050 1,081 - (1,022) 2,109 371 47 - (68) 350 854 498 - (58) (293) 1,001 - - - 2,803 - - - (62) 2,741 1,019 143 - - (96) 1,066 2,197 705 83 (935) 2,050 368 66 7 (70) 371 496 420 181 - (243) 854 6 (6) - 616 - (611) - (5) - 910 1,827 (98) - (531) 2,108 1,910 888 - (904) 1,894 358 47 - (64) 341 808 498 - (12) (293) 1,001 - - - 623 - - - (7) 616 822 143 - - (55) 910 1,986 671 68 (815) 1,910 360 63 2 (67) 358 450 420 181 - (243) 808 6 (6) - 38 www.infomedia.com.au www.infomedia.com.au 39 notes to the financial statements continued 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 13. INTANGIBLE ASSETS Goodwill - at cost Accumulated amortisation Intellectual property - at cost Accumulated amortisation 14. DEFERRED RESEARCH AND DEVELOPMENT COSTS Balance at beginning of year Research and development costs incurred during the year and deferred Accumulated amortisation Balance at end of year 15. DEFERRED TAX ASSETS Future income tax benefit 16. PAYABLES (CURRENT) Trade creditors Other creditors (a) Terms and conditions relating to the above financial instruments are set out in note 33. 2004 $’000 12,680 (3,462) 9,218 18,019 (3,566) 14,453 23,671 3,917 1,731 5,648 (1,940) 3,708 748 748 2,038 3,065 5,103 2003 $’000 12,812 (2,207) 10,605 18,469 (1,809) 16,660 27,265 2,940 977 3,917 (1,169) 2,748 1,206 1,206 1,137 2,686 3,823 2004 $’000 7,968 (1,562) 6,406 16,519 (3,378) 13,141 19,547 3,917 1,731 5,648 (1,940) 3,708 678 678 1,961 2,752 4,713 2003 $’000 8,101 (778) 7,323 16,969 (1,772) 15,197 22,520 2,940 977 3,917 (1,169) 2,748 1,040 1,040 1,120 2,573 3,693 40 www.infomedia.com.au www.infomedia.com.au 41 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 17. INTEREST-BEARING LIABILITIES (CURRENT) Bank loans Lease liability 18. PROVISIONS EXCLUDING TAX LIABILITIES (CURRENT) Employee entitlements 19. DEFERRED REVENUE (CURRENT) Revenue in advance Deferred gain on foreign currency forward contracts 20. INTEREST-BEARING LIABILITIES (NON-CURRENT) Bank loans Terms and conditions relating to the above financial instruments: (i) The bank loan drawings have been made pursuant to a multi- currency cash advance facility and are partially denominated in US dollars. The facility terminates in August 2005 and is provided on the condition of interlocking guarantees between the parent entity and its controlled entities (the guarantors). All outstanding US dollar denominated debt has been hedged at reporting date. 21. PROVISIONS EXCLUDING TAX LIABILITIES (NON-CURRENT) Employee entitlements 2004 $’000 - - - 1,140 1,140 777 726 1,503 4,173 4,173 2003 $’000 2,370 14 2,384 963 963 697 4,607 5,304 8,128 8,128 2004 $’000 - - - 950 950 726 331 1,057 4,173 4,173 2003 $’000 2,370 14 2,384 808 808 213 4,607 4,820 8,128 8,128 27 20(i) 27 704 704 680 680 296 296 354 354 40 www.infomedia.com.au www.infomedia.com.au 41 notes to the financial statements continued 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 22. CONTRIBUTED EQUITY Issued and paid up capital - shares fully paid 324,762,959 (2003: 324,422,732) Movement in shares on issue Beginning of the financial year Issued during the financial year: - Selective Share Plan - Employee Share Plan - Conversion of employee options End of the financial year (a) Employee Option Plan 2004 $’000 17,488 17,488 2003 $’000 17,474 17,474 2004 $’000 17,488 17,488 2003 $’000 17,474 17,474 2004 2003 Number of shares Number of $’000 shares $’000 324,422,732 17,474 323,734,073 17,474 27 27 - 324,227 16,000 - - 14 432,393 256,266 - - - - 324,762,959 17,488 324,422,732 17,474 A total of 550,000 options were issued to eligible employees during the year at an average exercise price of $0.76. Refer to Note 27. (b) Terms and conditions of contributed equity Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company. 23. EARNINGS PER SHARE The following reflects the income and share data used in the calculations of basic and diluted earnings per share: Earnings used in calculating basic and diluted earnings per share Weighted average number of ordinary shares used in calculating basic earnings per share Effect of dilutive securities: Share options Employee share plan shares Selective share plan shares 2004 $’000 20,686 2004 2003 $’000 18,325 2003 No. of shares No. of shares 324,666,639 324,335,454 372,599 94,216 - 49,875 83,725 3,554 Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share 325,133,454 324,472,608 42 www.infomedia.com.au www.infomedia.com.au 43 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 24. STATEMENT OF CASH FLOWS (a) Reconciliation of profit after tax to the net cash flows from operations Profit from ordinary activities after income tax expense Depreciation of non-current assets Amortisation of non-current assets Provision for doubtful debts Net profit from sale of non current assets Changes in assets and liabilities Trade receivables and other debtors Deferred research and development costs Trade and other creditors Provision for employee entitlements Tax provision Deferred income tax liability Future income tax benefit Prepayments Inventories Revenue in advance Net cash flow from operating activities (b) Reconciliation of cash Cash balance comprises: - cash on hand - cash on deposit (c) Financing facilities available At reporting date, the following financing facilities had been nego- tiated and were available: Total Facilities: USD13Million multi-currency cash advance facility Less: amortised portion Facility available before utilisation Facilities used at reporting date: Bank loans Facilities unused at reporting date: Bank loans 2004 $’000 2003 $’000 2004 $’000 2003 $’000 20,686 2,221 3,876 91 (622) (2,254) (1,731) 806 201 497 1,601 458 521 10 80 18,325 1,412 3,353 4 - (1,378) (977) 1,919 349 151 1,220 (585) (372) (36) (147) 21,099 1,797 3,255 91 (556) (851) (1,731) 545 84 517 1,628 362 546 18 118 18,618 1,194 2,871 4 - (2,259) (977) 2,025 310 52 1,195 (567) (377) (39) (193) 26,441 23,238 26,922 21,857 4,832 2,055 6,887 2,292 17,060 19,352 4,278 2,055 6,333 1,941 17,060 19,001 18,832 - 18,832 19,496 4,872 14,624 18,832 - 18,832 19,496 4,872 14,624 4,173 10,498 4,173 10,498 14,659 4,126 14,659 4,126 42 www.infomedia.com.au www.infomedia.com.au 43 notes to the financial statements continued 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 25. BUSINESSES ACQUIRED (a) Australian Windows Publishing business On 1 July 2002, Infomedia acquired the business of Australian Windows Publishing Pty Limited. The components of the 2004 $’000 2003 $’000 2004 $’000 2003 $’000 acquisition were: Consideration paid: Prepaid option fee Cash Net assets acquired: Inventory Plant and equipment Intellectual property including software code Goodwill arising from acquisition Total net assets acquired (b) EDS PartsImager catalogue business On 28 August 2002, Infomedia acquired the EDS PartsImager catalogue business. The components of the acquisition were: Consideration paid: Cash Net Assets Acquired: Intellectual property including software code Plant and equipment Goodwill arising from acquisition Total net assets acquired (c) VM Computer Services business On 31 March 2003, AutoConsulting Pty Ltd (a wholly owned con- trolled entity) acquired the VM Computer Services dealer manage- ment system business. The components of the acquisition were: Consideration paid: Cash Net Assets Acquired: Inventory Plant and equipment Intellectual property including software code Goodwill arising from acquisition Creditors Provisions Revenue in advance Total net assets acquired - - - - - - - - - - - - - - - - - - - - - - 60 596 656 4 70 450 132 656 22,076 14,519 181 7,376 22,076 1,583 5 20 1,500 336 (2) (38) (238) 1,583 - - - - - - - - - - - - - - - - - - - - - - 60 596 656 4 70 450 132 656 22,076 14,519 181 7,376 22,076 - - - - - - - - - 44 www.infomedia.com.au www.infomedia.com.au 45 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 26. EXPENDITURE COMMITMENTS (a) Lease expenditure commitments (i) Operating leases (non-cancellable): Minimum lease payments - not later than one year - later than one year and not later than five years - aggregate operating lease expenditure contracted for at balance date (ii) Finance leases: - not later than one year - later than one year and not later than five years - total minimum lease payments - future finance charges - lease liability - current liability 17 - aggregate finance lease expenditure contracted for at balance date (b) Assets which are the subject of finance leases include computer hardware and equipment. (c) Operating leases have an average lease term of two years (2003: two years). Assets which are the subject of operating leases include office space. 2004 $’000 2003 $’000 2004 $’000 2003 $’000 540 625 476 987 1,165 1,463 - - - - - - - 15 - 15 (1) 14 14 14 337 500 837 - - - - - - - 355 839 1,194 15 - 15 (1) 14 14 14 44 www.infomedia.com.au www.infomedia.com.au 45 notes to the financial statements continued 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 27. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS Employee Entitlements The aggregate employee entitlement liability is comprised of: Provisions (current) Provisions (non-current) Employee Option Plan 2004 $’000 2003 $’000 2004 $’000 2003 $’000 18 21 1,140 704 1,844 963 680 1,643 950 296 1,246 808 354 1,162 The Employee Option Plan entitles the Company to offer ‘eligible employees’ options to subscribe for shares in the Company. Options will be granted at a nil issue price unless otherwise determined by the directors of the Company and each Option enables the holder to subscribe for one Share. The exercise price for the Options granted will be as specified on the option certificate or, if not specified, the volume weighted average price for Shares of the Company for the five days trading immediately before the day on which the options were granted. The Op- tions may be exercised in accordance with the date determined by the Board, which must be within four years of the option being granted. Information with respect to the number of options granted under the employee share incentive scheme is as follows: Notes 2004 2003 Balance at beginning of year - granted - forfeited - exercised Balance at end of year Number of options 27(a) 27(b) 27(c) 27(d) 8,891,583 550,000 (2,517,583) (16,000) 6,908,000 Weighted average exercise price $1.07 $0.76 $1.57 $0.88 $0.86 Number of options 3,840,584 6,619,000 (1,568,001) - 8,891,583 (a) Options held at the beginning of the reporting period: The following table summarises information about options held by employees at 1 July 2003 Number of options 54,333 431,750 450,000 1,288,500 18,000 30,000 5,949,000 570,000 100,000 Grant date Earliest vesting date Expiry date 20/4/2001 20/4/2001 20/4/2001 23/4/2001 8/10/2001 23/3/2002 20/4/2004 18/12/2001 20/4/2004 16/4/2002 20/4/2004 26/3/2002 20/4/2004 8/10/2002 8/10/2004 12/11/2001 12/11/2002 12/11/2004 5/7/2002 1/7/2002 26/3/2004 20/5/2005 1/7/2004 1/8/2005 25/2/2002 25/2/2004 25/4/2006 Weighted average exercise price $1.47 $0.87 $1.18 - $1.07 Weighted average exercise price $2.00 $1.80 $1.73 $1.59 $1.29 $1.43 $0.88 $0.73 $1.00 46 www.infomedia.com.au www.infomedia.com.au 47 (b) Options granted during the reporting period: The following table summarises information about options granted by Infomedia Ltd to employees during the year Number of options 100,000 450,000 Earliest Grant date vesting date Expiry date Weighted average exercise price 5/1/2004 5/1/2005 24/5/2004 24/5/2005 5/7/2007 31/5/2007 $0.83 $0.75 (c) Options exercised during the reporting period: The following table summarises information about options exercised by employees during the year ended 30 June 2004: Number of options Grant date Exercise Date Expiry date Weighted average exercise price Proceeds from shares issued Number of shares issued Issue date Fair value of shares issued 16,000 5/7/2002 4/8/2003 20/5/2005 $0.88 $14,080 16,000 18/8/2003 $16,320 Fair value of shares issued during the reporting period is estimated to be the market price of shares of Infomedia Ltd on the ASX as at the close of trading on their respective issue dates. There were no options exercised during the year ended 30 June 2003. (d) Options held at the end of the reporting period: The following table summarises information about options held by employees at 30 June 2004 Number of options 18,000 30,000 5,933,000 477,000 450,000 Employee Share Plan Earliest Grant date vesting date Expiry date 8/10/2001 8/10/2002 8/10/2004 12/11/2001 12/11/2002 12/11/2004 5/7/2002 1/7/2002 26/3/2004 20/5/2005 1/7/2004 1/8/2005 24/5/2004 24/5/2005 31/5/2007 Weighted average exercise price $1.29 $1.43 $0.88 $0.73 $0.75 The Company provides employees, not including Directors, the opportunity to acquire shares in the Company. The scheme applies to em- ployees with at least 12 months service and provides that offers be made to at least 75% of the persons employed by the Company for at least twelve months and not more than twice in each financial year. Each offer to each employee cannot exceed a market value of $1,000. The consideration for each share offered will be nil unless otherwise determined by the Board. Shares may not be offered to employees who are ineligible, being employees with legal or beneficial interest in more than 5% of the Company or who control or may cast more than 5% of the max imum votes at a general meeting of the Company. The total number of shares issued pursuant to the Employee Share Plan at the date of this report is 973,114 (2003: 625,715). The following table lists the number of shares issued by tranche since the inception of the plan: Date of Issue 5/2/2001 5/10/2001 21/1/2002 19/7/2002 6/2/2003 21/7/2003 23/1/2004 15/7/2004 Total Number of shares Rounded unit price $ Value of tranche $’000 60,168 64,872 74,765 125,280 130,986 169,644 154,583 192,816 973,114 1.81 1.57 1.27 0.77 0.87 0.79 0.93 0.75 109 102 95 96 114 134 144 145 939 46 www.infomedia.com.au www.infomedia.com.au 47 notes to the financial statements continued 30 June 2004 27. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS (CONTINUED) Selective Share Plan Under the Selective Share Plan (SSP) and pursuant to the IPO, the Company has offered shares to selected persons on set offer dates. The par- ticipants are limited to 17 individuals named in the schedule to the SSP. As at the date of this report all shares under the plan have been issued. The consideration for each share offered was $nil. The set offer dates are provided below. Date 3 July 2002 Number of shares Status 432,393 Issued during the 2003 financial year Superannuation Commitments Contributions are made by the Company in accordance with the relevant statutory requirements. Contributions by the Company for the year ended 30 June 2004 were 9% (2003: 9%) of employee’s wages and salaries which are legally enforceable in Australia. The superannuation plans provide accumulation benefits. 28. CONTINGENT LIABILITIES (a) Interlocking Guarantees The bank loan drawings have been made pursuant to a multi-currency cash advance facility. The facility has been provided on the condition of interlocking guarantees between the Parent entity and its controlled entities (the guarantors). 29. DIRECTOR AND EXECUTIVE DISCLOSURES (a) Details of Specified Directors and Specified Executives (i) Specified directors Richard Graham Andrew Pattinson Barry Ford Myer Herszberg Geoffrey Henderson Frances Hernon (ii) Specified executives Gary Martin Guy Bryant Peter Adams Nick Georges Michael Roach Chairman and Chief Executive Officer Managing Director - IFM Europe Ltd Non-executive Director Non-executive Director Non-executive Director Non-executive Director General Manager - Electronic Catalogues Division Director of Technology Chief Financial Officer Company Secretary and General Counsel General Manager - Data Management Division 48 www.infomedia.com.au www.infomedia.com.au 49 notes to the financial statements continued 29. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) (b) Remuneration of Specified Directors and Specified Executives The Remuneration & Nomination Committee of the Board of Directors is responsible for reviewing compensation arrangements for the directors and the executive team. The Remuneration & Nomination Committee assesses the appropriateness of the nature and amount of these emoluments on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. The nature and amount of executive directors’ and officers’ emoluments was determined with regard to a number of factors, including the individual’s specific responsibilities and performance, market benchmarking, and the Company’s overall financial performance. Each executive director and officer has an employment contract with the company. The contracts provide a notice period not exceeding six months. At the date of this report, the employment contract with the Chief Executive Officer was subject to renewal. Primary Cash bonus 18,000 - - - - - 18,000 - 24,000 24,000 12,000 12,000 6,000 Salary & fees 237,445 197,697 42,800 42,800 42,800 42,800 606,342 474,082 147,616 158,304 140,929 145,104 108,114 Post emp- loyment Equity Total Non monetary Super- benefits annuation Options Employee/ Selective share plan - 28,554 - - - - 28,554 9,210 19,650 1,497 - - - 21,033 17,635 3,875 3,875 3,875 3,875 33,760 - - - - - 54,168 44,384 33,760 39,747 13,113 13,947 12,519 12,816 9,619 33,760 8,149 33,760 5,220 3,480 - - - - - - - 296,498 2,000 2,000 2,000 2,000 2,000 310,238 243,886 46,675 46,675 46,675 46,675 740,824 863,921 240,139 207,897 201,208 177,140 129,213 700,067 642,380 78,000 - 21,147 11,668 62,014 46,675 84,369 77,960 10,000 9,000 955,597 787,683 Specified Directors Andrew Pattinson Richard Graham Barry Ford Myer Herszberg Geoffrey Henderson Frances Hernon Total Remuneration: Specified Directors 2004 2003 Specified Executives Gary Martin Guy Bryant Nick Georges Peter Adams Michael Roach Total Remuneration: Specified Executives 2004 2003 48 www.infomedia.com.au www.infomedia.com.au 49 notes to the financial statements continued 30 June 2004 29. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) (c) Remuneration options: Granted and vested during the year During the financial year options were granted as equity compensation benefits to certain specified directors and certain specified executives as disclosed below. The options were issued free of charge. The options may only be exercised one year after grant date and expire three years from grant date. The options granted vest proportionately over a three year period. Terms & Conditions for Each Grant Specified Directors Andrew Pattinson Specified Executives Gary Martin Nick Georges Guy Bryant Peter Adams Michael Roach Vested number 388,000 388,000 388,000 60,000 60,000 40,000 Granted during the Value per option at Exercise price per First exercise Last exercise year - number Grant date grant date ($) share ($) date date 450,000 24/5/2004 0.19 0.75 24/5/2005 31/5/07 (d) Shares issued on exercise of remuneration options No options were exercised during the year by either specified directors or specified executives. (e) Option holdings of specified directors and specified executives Balance at beginning of period 1 July 2003 648,000 100,000 648,000 648,000 540,000 189,750 90,000 Specified Directors Andrew Pattinson Geoffrey Henderson Specified Executives Gary Martin Nick Georges Guy Bryant Peter Adams Michael Roach - - - - 450,000 - - 2,863,750 450,000 Granted as Options Net change Remuneration Exercised other Balance at end of period Vested at 30 June 2004 30 June 2004 Total Not exercisable Exercisable - - - - - - - - (66,000) (100,000) 582,000 388,000 - - (66,000) (66,000) (450,000) (99,750) (30,000) 582,000 582,000 540,000 90,000 60,000 388,000 388,000 60,000 60,000 40,000 (877,750) 2,436,000 1,324,000 - - - - - - - - 388,000 - 388,000 388,000 60,000 60,000 40,000 1,324,000 50 www.infomedia.com.au www.infomedia.com.au 51 (f) Shareholdings of Specified Directors and Specified Executives Shares held in Infomedia Ltd (number) Specified Directors Richard Graham Myer Herszberg Andrew Pattinson Barry Ford Frances Hernon Geoffrey Henderson Specified Executives Gary Martin Nick Georges Michael Roach Peter Adams Guy Bryant Total Balance 1 July 2003 Granted as remuneration On exercise of options Net change other Balance 30 June 2004 102,204,060 39,421,599 4,407,716 116,666 5,000 - 1,685,538 274,845 6,929 15,929 2,454 - - - - - - 2,347 2,347 2,347 2,347 2,347 148,140,736 11,735 - - - - - - - - - - - - - - - - - - (979,967) (260,416) - (11,500) - 102,204,060 39,421,599 4,407,716 116,666 5,000 - 707,918 16,776 9,276 6,776 4,801 (1,251,883) 146,900,588 All equity transactions with specified directors and specified executives other than those arising from the exercise of remuneration options and remuneration shares have been entered into under terms and conditions no more favourable than those the entity would have adopted if deal- ing at arm’s length. (g) Loans to specified directors and specified executives There were no loans at the beginning or the end of the reporting period to specified directors and specified executives. No loans were made available during the reporting period to specified directors or specified executives. (h) Other transactions and balances with specified directors and specified executives (i) Infomedia Ltd rents office space from Wiser Laboratory Pty Limited, a company in which Richard Graham is a director. The total rent payments for the year ended 30 June 2004 of $256,044 (2003: $277,999) were on commercial terms. (ii) Infomedia Ltd rents office space from Richard Graham. The total rent payments for the year ended 30 June 2004 of $163,382 (2003: $171,713) were on commercial terms. (iii) Infomedia Ltd rents office space to Wiser Laboratory Pty Limited, a company in which Richard Graham is a director. The total rent receipts for the year ended 30 June 2004 of $8,600 (2003: $10,053) were on commercial terms. 50 www.infomedia.com.au www.infomedia.com.au 51 notes to the financial statements continued 30 June 2004 Notes CONSOLIDATED INFOMEDIA LTD 2004 2003 2004 2003 $ $ $ $ 30. AUDITORS REMUNERATION Amounts received or due and receivable by the auditors of Infomedia Ltd for: - an audit or review of the financial report of the entity and any other entity in the consolidated entity 143,000 130,000 113,050 110,500 - other services in relation to the entity and any other entity in the consolidated entity 41,077 184,077 145,645 275,645 41,077 154,127 123,322 233,822 31. RELATED PARTY DISCLOSURES Ultimate Parent Infomedia Ltd is the ultimate Australian parent company Wholly owned group transactions (a) An unsecured, interest bearing loan of $18,987,298 (2003: $2,283,970) remains owing from Infomedia Investments Pty Limited to Infomedia Ltd. Interest is charged at commercial rates. (b) An unsecured, interest free loan of $146,818 was repaid to Infomedia Investments Pty Limited by Infomedia Ltd. (c) An unsecured, interest free loan of $2,753,338 (2003: $2,840,933) remains owing from Datateck Publishing Pty Limited to Infomedia Ltd. The loan is repayable in seven days upon demand. (d) An unsecured, interest free loan of $1,350,873 (2003: $1,763,423) remains owing from AutoConsulting Pty Limited to Infomedia Ltd. The loan is repayable in seven days upon demand. (d) An unsecured, interest free loan of $104,304 (2003: $nil) remains owing from IFM Europe Ltd to Infomedia Ltd. The loan is repayable in seven days upon demand. (e) During the year a management fee of $1,097,484 (2003: $1,097,484) was paid to Datateck Publishing Pty Limited by Infomedia Ltd. 52 www.infomedia.com.au www.infomedia.com.au 53 30 June 2004 32. SEGMENT INFORMATION PRIMARY SEGMENT Business segments REVENUE Sales revenue Other revenue Intersegment revenue Total segment revenue Unallocated revenue: Interest revenue Proceeds from sale of non current assets Total consolidated revenue RESULTS Segment result Unallocated items: Interest revenue Borrowing costs Consolidated entity profit from ordinary activities before income tax expense Income tax expense Consolidated entity profit from ordinary activities after income tax expense ASSETS Segment assets Unallocated assets: Cash Total assets LIABILITIES Segment liabilities Other segment information: 2(i) 3 Electronic Catalogue Other Division Divisions Eliminations Notes $’000 $’000 $’000 Total $’000 62,868 495 - 63,363 6,699 - 717 7,416 - - (717) (717) 69,567 495 - 70,062 428 2,515 73,005 32,091 (2,508) - 29,583 428 (283) 29,728 (9,042) 20,686 62,535 6,887 69,422 17,901 21,101 2,221 3,876 - - - - - 55,879 6,656 16,724 1,177 Acquisition of property, plant and equipment, intangible assets and other non-current assets 20,569 532 Depreciation Amortisation 2(ii) 2(ii) 1,597 2,824 624 1,052 52 www.infomedia.com.au www.infomedia.com.au 53  Other Divisions $’000 Eliminations $’000 Total $’000 5,074 - 660 5,734 - - (660) (660) 61,813 116 - 61,929 723 62,652 28,192 (2,330) - 25,862 notes to the financial statements continued 30 June 2003 32. SEGMENT INFORMATION (CONTINUED) PRIMARY SEGMENT Business segments REVENUE Sales revenue Other revenue Intersegment revenue Total segment revenue Unallocated revenue: Interest revenue Notes Electronic Catalogue Division $’000 56,739 116 - 56,855 Total consolidated revenue 2(i) RESULTS Segment result Unallocated items: Interest revenue Borrowing costs Consolidated entity profit from ordinary activities before income tax expense 3 Income tax expense Consolidated entity profit from ordinary activities after income tax expense ASSETS Segment assets Unallocated assets: Cash Total assets LIABILITIES Segment liabilities Other segment information: Acquisition of property, plant and equipment, intangible assets and other non-current assets Depreciation Amortisation 54 www.infomedia.com.au 41,376 6,884 23,105 1,357 23,571 2,016 2(ii) 2(ii) 901 2,445 511 908 723 (348) 26,237 7,912 18,325 48,260 19,352 67,612 24,462 25,587 1,412 3,353 - - - - - www.infomedia.com.au 55 SECONDARY SEGMENT While the products of the consolidated entity are used globally, the Company has only one material distinguishable geographical segment, Australia. Segment products and locations The consolidated entity’s operating divisions are organised and managed separately according to the nature of the products and the services they provide, with each segment offering different products. Infomedia’s core business involves the production of the Microcat and Partfinder electronic parts catalogues. These systems are specialised business tools designed to make the selection and sale of replacement parts fast, easy and accurate. Included within ‘other divisions’ are the Data Management and Business Systems divisions. Data Management provides a range of specialised data analysis and research services primarily to the automotive industry. Business Systems specialises in the development of business management and accounting systems, electronic automotive trading networks and system integration for retail automotive dealerships. All products are sourced from Australia. Segment accounting policies The group generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Segment accounting polices are the same as the consolidated entity’s accounting policies described in Note 1. During the financial year, there were no changes in segment accounting policies that had a material effect on the segment information. 54 www.infomedia.com.au www.infomedia.com.au 55 notes to the financial statements continued 30 June 2004 33. FINANCIAL INSTRUMENTS 33 (a) Interest rate risk The consolidated entity’s exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities at the balance date are as follows: Fixed interest rate maturing in: Financial Instruments Floating interest rate 1 year or less Over 1 to 5 years More than 5 years 2004 $’000 2003 $’000 2004 $’000 2003 $’000 2004 $’000 2003 $’000 2004 $’000 2003 $’000 (i) Financial Assets Cash Receivables - trade Net foreign currency forward contracts Total financial assets (ii) Financial liabilities 6,887 19,352 - - - - 6,887 19,352 - - - - - - - - - - - - - - - - - 14 - - - - - - - - - - - - - - 2,370 4,173 8,128 2,384 4,173 8,128 - - - - - - - - - - - - - - - - - - Trade and other creditors - Bank loans Finance lease liability 4,173 10,498 - - Interest rate cap (4,173) (10,498) Total financial liabilities - - 56 www.infomedia.com.au www.infomedia.com.au 57 Non-interest bearing Total carrying amount as per the balance sheet Weighted average effective interest rate 2004 $’000 2003 $’000 2004 $’000 2003 $’000 2004 2003 % % (i) Financial Assets Cash - - 6,887 19,352 4.25 4.30 Receivables - trade 8,346 6,191 8,346 6,191 Net foreign currency forward contracts Total financial assets (ii) Financial liabilities 765 2,995 765 2,995 9,111 9,186 15,998 28,538 N/A N/A N/A N/A Trade and other creditors 5,103 3,823 5,103 3,823 N/A N/A Bank loans Finance lease liability Interest rate cap - - - - - - 4,173 10,498 3.64 2.08 - - 14 - N/A 8.26 2.68 2.68 Total financial liabilities 5,103 3,823 9,276 14,335 56 www.infomedia.com.au www.infomedia.com.au 57 notes to the financial statements continued 30 June 2004 33. FINANCIAL INSTRUMENTS (CONTINUED) 33(b) Terms, conditions and accounting policies (i) The consolidated entity’s policies, including the terms and conditions of each class of financial asset, financial liability and equity instrument, I both recognised at balance date, are as follows: Recognised Financial Balance Sheet Accounting Policies Terms and Conditions Instruments Notes (i) Financial Assets Receivables - trade 6 Trade receivables are carried at nominal amounts due less Credit sales are on terms up to 30 any provision for doubtful debts. A provision for doubtful days. debts is recognised when collection of the full nominal amount is no longer possible. Unlisted shares 10,11 Unlisted shares are carried at the lower of cost or The unlisted shares held at balance recoverable amount. Dividend income is recognised date are ordinary shares. when dividends are declared by the investee. (ii) Financial Liabilities Trade and other 16 Liabilities are recognised for amounts to be paid in the Trade liabilities are normally settled creditors Finance lease liability (iii) Equity future for goods ad services received, whether or not in 30 day terms. billed to the Company. 17,20 The lease liability is accounted for in accordance with As at balance date, the Company AASB 1008. had an average finance lease term of three years. The average discount rate implicit in the lease is 8%. The security over finance leases is disclosed in notes 17 and 20. Ordinary shares 22 Ordinary share capital is recognised at the fair value of Details of shares issued at balance the consideration received by the Company. date are set out in note 22. (iv) Derivatives Forward exchange 34(d) The consolidated entity enters into forward exchange contracts contracts where it agrees to sell specified amounts of foreign currencies in the future at a predetermined rate. The objective is to protect the consolidated entity against the possibility of loss from future exchange rate fluctuations. The forward exchange contracts are charged to the profit and loss except those relating to hedges of specific commitments which are deferred and included in the measurement of specific commitments which are deferred and included in the measurement of the sale or purchase. 33 (c) Net fair values All financial assets and financial liabilities have been recognised at the balance date at their net fair values. There were no unrecognised finan- cial assets or financial liabilities at the balance date. 58 www.infomedia.com.au www.infomedia.com.au 59 33 (d) Credit risk exposure The consolidated entity’s maximum exposures to credit risk at balance date in relation to each class of recognised financial assets, other than derivatives, is the carrying amount of those assets as indicated in the balance sheet. The maximum credit risk does not take into ac count the value of any collateral or other security held, in the event other entities/parties fail to perform their obligations under the financial instruments in question. In relation to derivative financial instruments, whether recognised or unrecognised, credit risk arises from the potential failure of counterparties to meet their obligations under the contract or arrangement. The consolidated entity’s maximum credit risk exposure in relation to these is as follows: Forward exchange contracts - the full amount of the currency it will be required to pay or purchase when settling the forward exchange contract, should the counterparty not pay the currency it is committed to deliver to the company. At balance date the net amount was $765,000 (2003: $2,995,000). Concentrations of credit risk A majority of the consolidated entity’s electronic cataloguing sales are invoiced directly to vehicle manufacturers or their national distributors. Consequently, rather than the consolidated entity collecting individual sales subscriptions from individual subscribers, it receives monthly payments from a small number of credible companies. Credit risk in trade receivables is managed in the following ways: - credit sales are on terms up to 30 days; - an agent acts on the company’s behalf in foreign locations; - subscribers must sign a standard user agreement, accepting terms and conditions. 34. IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS Infomedia Ltd has commenced transitioning its accounting policies and financial reporting from current Australian Standards to Australian equivalents of International Financial Reporting Standards (IFRS). The company has allocated internal resources and engaged expert consultants to perform diagnostics and conduct impact assessments to isolate key areas that will be impacted by the transition to IFRS. As a result of these procedures, Infomedia has graded impact areas as either high, medium or low and has established dedicated project teams to address each of the areas in order of priority as represented by the gradings. As Infomedia has a 30 June year end, priority has been given to considering the preparation of an opening balance sheet in accordance with AASB equivalents to IFRS as at 1 July 2004. This will form the basis of accounting for Australian equivalents of IFRS in the future, and is required when Infomedia prepares its first fully IFRS compliant financial report for the year ended 30 June 2006. Set out below are the key areas where accounting policies will change and may have an impact on the financial report of Infomedia. At this stage the company has not been able to reliably quantify the impacts on the financial report. Hedge Accounting Under AASB 139 Financial Instruments: Recognition and Measurement in order to achieve a qualifying hedge, the entity is required to meet the following criteria: - Identified the type of hedge - fair value or cash flow; - Identify the hedged item or transaction; - Identify the nature of the risk being hedged; - Identify the hedging instrument; - Demonstrate that the hedge has and will continue to be highly effective; and - Document the hedging relationship, including the risk management objectives and strategy for undertaking the hedge and how effec- tiveness will be tested. This will result in a change in the entity’s current accounting policy which applies hedge accounting to its sales revenue under forward foreign exchange contracts. The contracts are specific hedges and will be separately identified and documented in accordance with the requirements of IAS 39. Under the new policy hedge accounting will require mark to market valuations with the movements directly recorded in an equity reserve. 58 www.infomedia.com.au www.infomedia.com.au 59 notes to the financial statements continued 30 June 2004 34. IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS (CONTINUED) Goodwill Under the Australian equivalent to IFRS 3 Business Combinations goodwill will no longer be able to be amortised but instead will be subject to annual impairment testing. This will result in a change in the Group’s current accounting policy which amortises goodwill over its useful life but not exceeding 10 years. Under the new policy, amortisation will no longer be charged, but goodwill will be written down to the extent it is impaired. Reliable estimation of the future financial effects of this change in accounting policy is impracticable because the conditions under which impairment will be assessed are not yet known. Impairment of assets Under the Australian equivalent to IAS 36 Impairment of Assets the recoverable amount of an asset is determined as the higher of net selling price and value in use. This will result in a change in the Group’s current accounting policy which determines the recoverable amount of an asset on the basis of discounted cash flows. Under the new standard there are more stringent tests that increase the risk that impairment of as- sets may occur and potentially lead to future write-downs. Share based payments Under AASB 2 Share based Payments, the company will be required to determine the fair value of options issued to employees as remuneration and recognise an expense in the Statement of Financial Performance. This standard is not limited to options and also extends to other forms of equity based remuneration such as Infomedia’s Employee Share Plan. It applies to all share-based payments issued after 7 November 2002 which have not vested as at 1 January 2005. Estimation of the future financial effects of this change in accounting policy is impracticable as the details of future equity based remuneration plans are unknown. Only 450,000 options have been issued after 7 November 2002 and remain outstanding at balance date. The notional expense to 30 June 2004 pertaining to these options is $3,000 and will reduce opening retained earnings upon transition. The value of shares issued under the employee share plan after 7 November 2002 to balance date and not recorded as an expense was $392,000 and will reduce opening retained earnings upon transition. 60 www.infomedia.com.au directors’ declaration In accordance with a resolution of the Directors of Infomedia Ltd, I state that: (1) In the opinion of the Directors: (a) the financial statements and notes of the Company and of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2004 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards and Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. On behalf of the Board. Richard David Graham Chairman Sydney, 25 August 2004 60 www.infomedia.com.au www.infomedia.com.au 61 audit report Independent audit report to members of Infomedia Ltd Matters relating to the Electronic Presentation of the Audited Financial Report This audit report relates to the fi nancial report of Infomedia Ltd (the company) for the year ended 30 June 2004 included on the company’s web site. The company’s directors are responsible for the integrity of the company’s web site. The audit report refers only to the statements named below. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of this report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited fi nancial report to confi rm the information included in the audited fi nancial report presented on the web site. Scope The fi nancial report and directors’ responsibility The fi nancial report comprises the statement of fi nancial position, statement of fi nancial performance, statement of cash fl ows, accompanying notes to the fi nancial statements, and the directors’ declaration for Infomedia Ltd (the company) and the consolidated entity, for the year ended 30 June 2004. The consolidated entity comprises both the company and the entities it controlled during that year. The directors of the company are responsible for preparing a fi nancial report that gives a true and fair view of the fi nancial position and performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the fi nancial report. Audit approach We conducted an independent audit of the fi nancial report in order to express an opinion on it to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the fi nancial report is free of material misstatement. The nature of an audit is infl uenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected. We performed procedures to assess whether in all material respects the fi nancial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards in Australia, and other mandatory fi nancial reporting requirements in Australia, a view which is consistent with our understanding of the company’s and the consolidated entity’s fi nancial position, and of their performance as represented by the results of their operations and cash fl ows. We formed our audit opinion on the basis of these procedures, which included: · examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the fi nancial report, and · assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of signifi cant accounting estimates made by the directors. 62 www.infomedia.com.au www.infomedia.com.au 63 While we considered the effectiveness of management’s internal controls over fi nancial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls. We performed procedures to assess whether the substance of business transactions was accurately refl ected in the fi nancial report. These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the company. Independence We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. In addition to our audit of the fi nancial report, we were engaged to undertake the services disclosed in the notes to the fi nancial statements. The provision of these services has not impaired our independence. Audit opinion In our opinion, the fi nancial report of Infomedia Ltd is in accordance with: (a) the Corporations Act 2001, including: (i) giving a true and fair view of the fi nancial position of Infomedia Ltd and the consolidated entity at 30 June 2004 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and (b) other mandatory fi nancial reporting requirements in Australia. Ernst & Young J K Haydon Partner Sydney, 25 August 2004 www.infomedia.com.au 63 corporate governance CORPORATE GOVERNANCE STATEMENT Introduction Infomedia Ltd is committed to good corporate governance that enhances effectiveness and ensures an appropriate degree of accountability and transparency to shareholders and other stakeholders. This statement, which is current as at 25 August 2004, addresses the approach adopted by the Company to the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations1. The Board first began its consideration of the ASX Corporate Governance Guidelines during the course of the 2003 financial year. To aid the review process the Board has made adjustments to the structure of its Committees so that they now comprise the Audit & Risk Committee, the Remuneration & Nomination Committee and the Corporate Governance Committee. Each Committee is presently chaired by an Independent Director with its membership determined by the Board on the basis of greatest expertise in the areas of relevance to each Committee. Background details and meeting attendance records during financial year 2004 for members of each of the Audit & Risk, Remuneration & Nomination and Corporate Governance Committees are set out on page 23 of the Directors’ Report. The Board and its Committees endorse the ‘if not, why not?’ framework adopted by the ASX Corporate Governance Council. Throughout the reporting year the Board has, upon the recommendation of the appropriate Committee, progressively updated existing charters, policies and procedures and also adopted additional charters, policies and procedures where deemed necessary. Together these documents support the ASX CGC Principles in a manner which the Board believes is appropriate to Infomedia’s circumstances. Summaries of these various charters, policies and procedures will be progressively added to Infomedia’s website during the course of this year. In considering the ASX CGC Recommendations, the Board and relevant Committees took as an overriding imperative the development and articulation of appropriate charters, policies and procedures having regard to, among others, those factors identified in the ASX CGC Commentary as relevant. Of such factors, Infomedia’s size was important and, as suggested in the ASX CGC Commentary, in prioritising, a high level, top down approach was adopted. Consequently, the various procedures and policies considered appropriate by Infomedia are at differing stages of development and organisational implementation as permitted by its resources and as discussed in more detail below. Each of the Board’s Committees recognises the intent of the ASX CGC Corporate Governance Guidelines and in financial year 2005 will continue the process of considering the way relevant ASX CGC Recommendations should be applied in light of Infomedia’s particular circumstances. A series of corporate governance and legal information sessions are planned for financial year 2005. These are aimed at providing organisation- wide education about the existence, purpose and operating framework of the corporate governance initiatives, including the Company’s Code of Conduct, Risk Management Policy, Market Disclosure Policy and policy for Share Trading by Company Directors, Officers and Employees. The material set out in this Corporate Governance Statement has been prepared in accordance with the ASX Listing Rules and, in particular, ASX CGC Recommendations 2.5, 3.3, 4.5, 5.2, 7.1 and 9.5. Unless otherwise indicated, the ASX CGC Recommendations were in place for the whole financial year. 64 www.infomedia.com.au  ASX CGC Principle 1 – Lay solid foundations for management and oversight Recognise and publish the respective roles and responsibilities of board and management ASX CGC Principle 2 – Structure the Board to add value Have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties ASX CGC Principle 8 – Encourage enhanced performance Fairly review and actively encourage enhanced board and management effectiveness ASX CGC Principle 9 – Remunerate fairly and responsibly Ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to corporate and individual performance is defined The Company’s Constitution requires a minimum of three and a maximum of seven Directors, of whom at least two must ordinarily be resident in Australia. Under the Company’s Constitution one third of the Directors, and any other Director not in such one third who has held office for three years or more, other than the Chief Executive Officer, must retire by rotation each year. If eligible, the retiring Directors may offer themselves for re-election. The Infomedia Board comprises six Directors and details of the names, terms of office, committee memberships, meeting attendance record, skills, experience and expertise of each, along with photographs, appear in the Directors’ Report on pages 18 and 19. Since listing on the ASX CGC in August 2000 in particular, the composition and size of the Infomedia Board has been shaped by its Constitution and the contribution Directors are able to make, both individually and collectively. An emphasis has, and through the interaction of the Board and the Remuneration & Nomination Committee, will continue to be, placed on promoting, among other attributes, an appropriate mix of relevant skills, independence, expertise, business knowledge and executive and non-executive participation. ASX CGC Recommendation 1.1 A formal Charter of the Board of Directors was adopted in early July 2004 following careful and considered deliberation by both the Corporate Governance Committee and the Board itself. As noted in the introduction above, the priority was to document an appropriate division of Board and Management responsibilities. The Board’s focus is on the Company’s objectives, determining the strategy for achieving those objectives and setting the overall policy framework within which the business of the Company is conducted whilst ensuring that the Company operates in accordance with good management and governance practices. The Corporate Governance Committee was established to support the Board in the areas not covered by Audit & Risk and Remuneration & Nomination Committees. The members of the Corporate Governance Committee are Geoffrey Henderson (Chair), Myer Herszberg and Frances Hernon. Each is a Non-executive Director. www.infomedia.com.au 65 corporate governance continued ASX CGC Recommendation 2.1 Traditionally, the Board has applied an executive director/non-executive director classification to its members. Following the appointment of Geoffrey Henderson as an additional Non-executive Director in February 2003, the Infomedia Board has comprised four Non-executive Directors and two Executive Directors. Three of the Company’s Directors, Barry Ford, Frances Hernon and Geoffrey Henderson, clearly meet an objective assessment of quantitative, qualitative and cumulative criteria for independence. A fourth Non-executive Director, Myer Herszberg, whilst being a major shareholder is considered by the Board, having regard to quantitative, qualitative and cumulative criteria, to operate independently and objectively. As a result the Board believes it comprises a majority of independent directors and so complies with ASX CGC Recommendation 2.1. This independence will be reviewed periodically by the Board to ensure its continued good practice in this area. Ultimately, however, the Board accepts that its members remain in office upon the vote of the Company’s shareholders and that they may elect members to the Board regardless of their standing, independent or otherwise. In order to facilitate the discharge of their duties, including in respect of independent decision- making, the Board confirmed in April 2004 its policy for Directors obtaining independent professional advice at the expense of the Company. ASX CGC Recommendation 2.2 and ASX CGC Recommendation 2.3 The Board has considered the appropriateness for Infomedia of appointing an independent Chairman and, in consequence, splitting the role of Chairman and Chief Executive Officer as proposed by ASX CGC Recommendations 2.2 and 2.3. The Board is of the view that its independence as a whole is not compromised by the appointment of Richard Graham as Chairman and as Chief Executive Officer and that it is in the best interests of the Company to retain the current structure. The Board believes that at this time, in its stage of growth, Infomedia is best served by keeping a strong focus on the development and implementation of strategic platforms. It believes that Richard Graham’s industry knowledge, both technological and automotive, uniquely positions him for the kind of strategic thinking required of the Chairman and, that as its founder, his thorough understanding of the Company’s business from its inception through its continued market and product expansion, positions him well for the day to day stewardship of the Company. ASX CGC Recommendation 2.4 and ASX CGC Recommendation 9.2 The members of the Remuneration & Nomination Committee are Frances Hernon (Chair), Myer Herszberg and Barry Ford. Each is a Non- executive Director. Upon the recommendation of the Remuneration & Nomination Committee, in April 2004 the Board adopted an amended Remuneration & Nomination Committee Charter. During the reporting period the Remuneration & Nomination Committee also began reconsidering and then formalising a policy for the appointment of directors and the procedures for their selection. The Committee intends recommending both the policy and the procedures to the Board for consideration and adoption in the first six months of financial year 2005 and will then make a summary of them available on the Infomedia website shortly thereafter. ASX CGC Recommendation 8.1 and ASX CGC Recommendation 9.1 Upon recommendation of the Remuneration & Nomination Committee a Remuneration and Performance Evaluation Policy for Directors and Senior Executives was adopted by the Board in July 2004. 66 www.infomedia.com.au The Policy clearly outlines the criteria for assessing the performance of the Board as a whole, the Directors as individuals, the Chairman of the Board and the Senior Executives, and aims to provide a framework for structuring total remuneration that will facilitate both the short and long term growth and success of the Company, that is competitive with the market place and that is demonstrably linked to the Company’s overall performance. It is anticipated that from financial year 2005 onwards the annual performance evaluation process will be conducted in accordance with the Remuneration and Performance Evaluation Policy for Directors and Senior Executives. During this reporting period and in the process of developing the Remuneration and Performance Evaluation Policy for Directors and Senior Executives, the Remuneration & Nomination Committee, in conjunction with Infomedia’s Human Resources Manager, reviewed the Company’s remuneration and performance evaluation practices. The Committee made use of independent surveys commissioned from external specialist organisations, and also utilised external market evidence to make recommendations with respect to the Senior Executives’ financial year 2005 salary packages. In assessing remuneration levels of Non-executive Directors, regard was had to a number of factors including benchmarked industry practice and the assumption of additional Committee responsibilities. In assessing remuneration levels of Executive Directors and other Senior Executives, regard was had to a number of factors, including the individual’s specific responsibilities and performance, market benchmarking and the Company’s overall performance. In preparing the remuneration information contained on pages 48 and 49 of the Directors’ Report, regard was had to the ASX CGC Commentary accompanying ASX CGC Recommendation 9.1 and, in particular, the suggestions for disclosure. ASX CGC Recommendation 9.3 In formulating the Remuneration and Performance Evaluation Policy for Directors and Senior Executives, regard was had to both market practice and to the best practice guidance provided in the ASX CGC Commentary accompanying ASX CGC Recommendation 9.3. Non-executive Directors are remunerated by way of fees and statutory superannuation contributions: they do not receive any additional retirement benefits and nor do they currently participate in any of the Company’s incentive arrangements. Non-executive Directors have previously received options, but this practice was reconsidered with the introduction of the Remuneration and Performance Evaluation Policy for Directors and Senior Executives, as a result of Remuneration & Nomination Committee discussion on ASX CGC Recommendation 9.3 and the accompanying ASX CGC Commentary. The Remuneration & Nomination Committee and in turn the Board will continue to monitor the issue as each recognises that for smaller companies option-based remuneration may be an appropriate method of remunerating non-executive directors when accompanied by an appropriate framework and proper disclosure. Geoffrey Henderson had received 100,000 options upon his appointment as a Non-executive Director on 25 February 2003 and voluntarily relinquished these on 4 June 2004. ASX CGC Recommendation 9.4 The Company currently has two equity-based incentive plans: an Employee Option Plan applicable to certain eligible employees, including Senior Executives and an Employee Share Plan, applicable to all permanent employees of one or more years of service, including Senior Executives but excluding Executive Directors. These plans were established prior to Infomedia’s listing in August 2000. They were disclosed in the 14 July 2000 prospectus and operate in accordance with both the Corporations Act and the ASX Listing Rules. www.infomedia.com.au 67 corporate governance continued Given this background, there is no present intention to obtain shareholder approval ahead of the issue of further securities under the Employee Option Plan or the Employee Share Plan as proposed by ASX CGC Recommendation 9.4. Further details of Senior Executive remuneration under these plans is included in the information contained on pages 22 and 50-51 of the Directors’ Report. ASX CGC Principle 3 – Promote ethical and responsible decision making Actively promote ethical and responsible decision making ASX CGC Principle 10 – Recognise the legitimate interests of stakeholders Recognise legal and other obligations to all legitimate stakeholders ASX CGC Recommendation 3.1 and ASX CGC Recommendation 10.1 A formal Code of Conduct was adopted in April 2004 following careful and considered deliberation during the financial year by both the Audit & Risk Committee and the Board itself. The Infomedia Code of Conduct applies to all Infomedia personnel including Directors, Senior Executives and employees and was developed having regard to the ASX CGC Commentary accompanying ASX CGC Recommendations 3.1 and 10.1. Whilst Infomedia has long held and emphasised personal integrity, respect and ethical business practices as core tenets, the Infomedia Code of Conduct strengthens the Company’s commitment to them by further articulating the cultural values which permeate the Company and better informing its interactions with all non- shareholder stakeholders. Included in the series of corporate governance and legal information sessions planned for financial year 2005, will be sessions focusing on the existence, purpose and operating framework of the Code of Conduct. A key aim is to promote greater awareness and use of enhanced procedures for seeking guidance where areas of concern exist and for the notification of matters which potentially involve a compliance or business risk element. ASX CGC Recommendation 3.2 A formal Policy on Share Trading by Company Directors, Officers and Employees was originally established in October 2001 and was reviewed, amended and adopted by the Infomedia Board in April 2004, upon the recommendation of the Corporate Governance Committee. Principle 4 – Safeguard integrity in financial reporting Have a structure to independently verify and safeguard the integrity of the company’s financial reporting Principle 7 – Recognise and manage risk Establish a sound system of risk oversight and management and internal control Infomedia was required, by virtue of its inclusion in the S&P/ASX CGC All Ordinaries Index at the beginning of financial year 2004 to fully comply throughout this reporting period with the ASX CGC Recommendations accompanying ASX CGC Principle 4, relating to audit committee composition, operation and responsibility. 68 www.infomedia.com.au ASX CGC Recommendation 4.1 and ASX CGC Recommendation 7.2 The Company’s financial reporting obligations for year 2004 have been fulfilled, as they have in previous years, in accordance with applicable legal and accounting requirements: see the financial statements and notes contained in the Directors’ Report commencing on page 18 and the Independent Audit Report appearing on page 62. Additionally, in response to ASX CGC Principle 7 external advisors recently commenced work on identifying, reviewing, and where necessary documenting the finance area’s risk controls. At the date of this statement that process is not yet complete. Against this background, and given also the stage of the Company’s development and the associated difficulties in identifying future risk along with the inherent time and resource commitment involved in establishing and operating an effective risk management framework, the Chief Executive Officer and the Chief Financial Officer do not regard it as appropriate that they provide the certifications under ASX CGC Recommendation 7.2 and in turn, the certification under ASX CGC Recommendation 4.1. It is intended that the Audit & Risk and Corporate Governance Committees will continue to forge the development of the Company’s risk management and internal control framework, so that next year the Chief Executive Officer and the Chief Financial Officer will be better placed to provide the certifications proposed by ASX CGC Recommendation 7.2 and the certification required (as it then will be) by the Corporations Act equivalent of ASX CGC Recommendation 4.1. ASX CGC Recommendation 4.2, ASX CGC Recommendation 4.3 and ASX CGC Recommendation 4.4, ASX CGC Principle 7 Infomedia originally established an Audit Committee prior to its listing on the ASX in August 2000. Today it is known as the Audit & Risk Committee and its members are Barry Ford (Chair), Myer Herszberg and Geoffrey Henderson. Each is a Non-executive Director. The Board firmly believes the Audit & Risk Committee is of ‘…sufficient size, independence and technical expertise to discharge its mandate effectively’. As noted in the discussion around ASX CGC Recommendation 2.1 above, although traditionally the Board has applied an executive director/non-executive director classification to its membership, the Board believes that Barry Ford, Myer Herszberg and Geoffrey Henderson meet an objective assessment of quantitative, qualitative and cumulative criteria for independence. As such the Committee meets the requirements for an independent Chairman and a majority of independent directors. A formal Audit & Risk Committee Charter was originally adopted in 2000 and an amended version approved by the Board in April 2004 following careful and considered deliberation during the financial year by both the Audit & Risk Committee and the Board itself. The Audit & Risk Committee acknowledges the importance of external auditor independence. The Company’s external auditor’s engagement partner was rotated in financial year 2002. In response to both legislative change and to the ASX CGC Commentary, in the last quarter of financial year 2004 the Audit & Risk Committee began reconsidering the policy for the selection and appointment of the Company’s external auditor and the rotation of engagement partners. The Committee intends recommending formalised procedures to the Board for consideration and adoption during financial year 2005, and will then make a summary of them available on the Infomedia website shortly thereafter. ASX CGC Recommendation 7.1 Upon the recommendation of the Audit & Risk Committee, the Board adopted the Risk Management Policy in July 2004 following careful and considered deliberation during the financial year by both the Audit & Risk Committee and the Board itself. The Risk Management Policy allocates oversight responsibility to the Audit & Risk Committee whilst the establishment of risk management procedures, compliance and control rests with Senior Executives and, at a daily operating level, with individuals as part of regular business conduct. www.infomedia.com.au 69 corporate governance continued During the reporting period Senior Executives oversaw assessments of the Company’s current risk management and control practices and discussed with the Audit & Risk Committee the process for further developing them in line with ASX CGC Principle 7. Throughout financial year 2005 work will continue on updating and enhancing the Company’s existing gap analysis, risk analysis and risk profile. As noted above, work recently commenced on reviewing, and where necessary documenting the finance area’s risk controls. Other priorities identified by the gap analysis and risk profile will also be addressed in turn. With appropriate assistance from the Corporate Governance Committee, the outcomes of these actions will be used to assist in testing internal controls and by the Audit & Risk Committee in discharging its oversight and assessment functions. ASX CGC Principle 5 – Make timely and balanced disclosure Promote timely and balanced disclosure of all material matters concerning the company ASX CGC Recommendation 5.1 A Market Disclosure Policy was adopted by the Board in April 2004 following careful and considered deliberation during the financial year by both the Corporate Governance Committee and the Board itself. The Market Disclosure Policy was developed having regard to the ASX CGC Commentary and suggested content accompanying ASX CGC Recommendation 5.1. ASX CGC Principle 6 – Respect the rights of the shareholders Respect the rights of shareholders and facilitate the effective exercise of those rights ASX CGC Recommendation 6. 1 and ASX CGC Recommendation 6.2 Through a series of initiatives Infomedia continues to demonstrate its commitment to promoting effective communication with all shareholders. Such initiatives include the continued development of the Company website, where this Corporate Governance Statement, annual, half yearly and quarterly reports, a synopsis of the Infomedia business model, media releases, achievements, share price information and the July 2000 prospectus, are available. Infomedia is looking closely at how it might best and most cost effectively introduce e-communications to shareholders, and in the process, save paper and assist in preserving the environment. Infomedia will carefully consider any e-communication initiative its share registry, or any other provider, introduces in response to ASX CGC Recommendations 6.1 and 6.2. Infomedia also acknowledges, and will consider and adopt as appropriate to its circumstances, the Guidelines for notices of meeting included in the ASX CGC Commentary accompanying ASX CGC Recommendation 6.1. Shareholder participation at general meetings is encouraged and Infomedia’s auditor, Ernst & Young, attends the annual general meeting and is available to answer shareholder questions. (Footnotes) 1 The ASX Corporate Governance Guidelines containing the ASX CGC Principles, the ASX CGC Recommendations and the ASX CGC Commentary 70 www.infomedia.com.au additional information Top 20 shareholders as at 25 August 2004 Entity/Name Shares % of total Rank Wiser Laboratory Pty Ltd Yarragene Pty Ltd Westpac Custodian Nominees Ltd RBC Global Services Australia Nominees Pty Ltd JP Morgan Nominees Pty Ltd Citicorp Nominees Pty Ltd National Nominees Ltd Mr Andrew Pattinson Perpetual Trustee Company Limited ANZ Nominees Government Superannuation Office Niako Investments Pty Ltd The University of Melbourne Wiser Centre Pty Ltd Mr Richard Graham HSBC Custody Nominees (Australia) Ltd Victorian Workcover Authority Mr Gary Martin Mr Dan Salazar Hot Springs Pty Ltd Infomedia Ltd – Range of shares as at 25 August 2004 Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,000 + Escrowed TOTAL 100,277,501 39,421,599 35,989,252 30,125,227 24,832,929 18,992,267 16,192,090 4,407,716 4,013,000 3,421,515 2,075,085 1,345,106 1,058,465 1,000,000 926,559 889,277 725,800 709,257 641,248 500,000 30.86 12.13 11.08 9.27 7.64 5.84 4.98 1.36 1.23 1.05 0.64 0.41 0.33 0.31 0.29 0.27 0.22 0.22 0.20 0.15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Shareholders Shares Held % of Total 373 1,182 669 766 67 281,974 3,808,817 5,511,469 19,127,942 295,392,036 833,537 0.09 1.17 1.70 5.89 90.89 0.26 3,057 324,955,775 100.00 As at 25 August 2004 there were 137 shareholders holding less than a marketable parcel of 500 ordinary shares. www.infomedia.com.au 71 corporate directory Infomedia Ltd 373 Warringah Road Frenchs Forest NSW 2086 ABN 63 003 326 243 Telephone: (02) 9454 1500 Facsimile: (02) 9454 1844 Internet: www.infomedia.com.au Directors Richard Graham – Chairman and CEO Andrew Pattinson – Executive Director and Managing Director, IFM Europe Limited Barry Ford – Non-executive Director Frances Hernon – Non-executive Director Geoffrey Henderson – Non-executive Director Myer Herszberg – Non-executive Director Company officers Nick Georges – Company Secretary Peter Adams – Chief Financial Officer Auditors Ernst & Young The Ernst & Young Building 321 Kent Street Sydney NSW 2000 Share registry Computershare Registry Services Pty Ltd GPO Box 7045 Sydney NSW 1115 Lawyers Cowley Hearne Lawyers Pty Limited Level 10 60 Miller Street North Sydney NSW 2060 72 www.infomedia.com.au photographic index Page 2 Shae Condon, Infomedia Receptionist and HR Administration Assistant Page 4 Infomedia headquarters – Frenchs Forest, Australia Page 6 IFM Europe Limited office – Cambridge, England Page 7 Mikael Klockseth, Infomedia Customer Service Specialist Page 8 Paul Waters, IFM Europe Client Manager at Toyota dealership in Sweden Page 12 Dan O’Shea, Infomedia Production Assistant Page 13 Stephanie Maréchal, Infomedia Customer Service Specialist Page 16 Infomedia Business Systems Division staff demonstrating AutoLedgers Page 18-19 Infomedia Board of Directors FY2004 Page 73 Michael Johnson, Infomedia Graphic Designer and Courtney Sloane, Infomedia Marketing Assistant AutoMotives, AutoLedgers, AutoTerm, Infomedia, Microcat, Microcat FRESH, Partfinder, and SIP are registered trademarks, and AutoDocs, AutoOffice, Datateck, Future Motors, LIVE, Lubricant Recommendation Guides, Lubrication & Tune-up Guide, MARKET, NetLube, Nova, PartsImager, PCLube, Service Information Publications and SuperService Menus are all trademarks of Infomedia Ltd for its business processes, software and documentation products. All other trademarks are the property of their respective owners. AutoMotives, AutoLedgers, AutoTerm, Infomedia, Microcat, Microcat FRESH, Partfinder, and SIP are registered trademarks, and AutoDocs, AutoOffice, Datateck, Future Motors, LIVE, Lubricant Recommendation Guides, Lubrication & Tune-up Guide, MARKET, NetLube, Nova, PartsImager, PCLube, Service Information Publications and SuperService Menus are all trademarks of Infomedia Ltd for its business processes, software and documentation products. All other trademarks are the property of their respective owners. 

Continue reading text version or see original annual report in PDF format above